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Projects:Tax As Expenses/User Guide

Contents

User Guide

Abstract and Justification

Tax Posting as expenses is a new enhancement in ERP core which will be available for MP 15 and further MP.

It is intended to allow the end user to post taxes as an expense for those cases of non-deductible taxes, and for those cases of Organizations do not allowed to deduct taxes at all because of Organization type (Public Sector) or Organization activity.

User Goals

Taxes (by example VAT) will be posted as an expense or as a liability (VAT deductible) depending on "Organization" and/or "Tax Rate" parameters setup, in other words:

New Definitions and Acronyms

VAT = Value Added Tax

Prerequisites

Installation

No specific requirements here but to have ERP core version 2.50MP15 or higher

Configuration

Feature Setup

1.- There are some organizations like Public Sector for which tax deduction is not allowed, that means:

“Tax Posting as Expense” feature will allow the end-user to set up at Organization level, Organizations as “Tax Not Deductible” Organizations and to select the Exempt Sales Tax to be used while posting sales invoices as shown in the screen below:

Public Org.png

But besides “Tax Posting as Expense” feature will allow the end-user to setup deductible purchase VAT for Tax Not Deductible Organizations in case it is required, as shown in the screen below.

D TaxRate.png

2.- There are some organizations for which tax deduction is allowed, that means:

“Tax Posting as Expense” feature will allow the end-user to properly setup specific "Purchase" VAT as “Tax Not Deductible” which therefore will be posted as an expense, as shown in the screen below.

ND taxRate.png

In any case, purchase VAT posted as an expense means that the corresponding purchase VAT must be posted in the Product Expense account, that means a higher cost/expense for the organization.

Organization Setup

As described above "Tax Posting as Expense" feature allow the end to set-up Tax Deductible Organization (normal behavior) and from now on Non-Tax Deductible Organization.

A Non-Tax Deductible Organization can be setup. For doing that end-user must be navigate to the application path: General Setup || Enterprise || Organization || Organization >> Information - and for the PublicOrg below parameters must be setup:

A Tax Deductible Organization can be setup. For doing that end-user must be navigate to the application path: General Setup || Enterprise || Organization || Organization >> Information - and for the "TaxD Org" below parameters must be setup:

BP (Vendor and Customer) Setup

It is important to setup BP (Vendors) properly for the system to use the tax rate required:

For getting the above, end-user must properly setup Vendor location in the application path: Master Data Management || Business Partner || Business Partner >> Location/Address

National Vendor (same applies to Customers):

Nat Vendor.png

Intra-community vendor (same applies to Customers):

Intra vendor.png

Non-Deductible Tax Category Setup & Allocation

For those cases an Organization is allowed to deduct VAT but for some specific tax rates, it will be required to :

1. Define a Non-deductible Tax Category to be setup at the application path:Financial Management || Accounting || Setup || Business Partner Tax Category || Business Partner Tax Category, as shown below.

BPTaxCategory.png

(It is important to remark here that a VAT is deductible or not deductible for an Organization which can deduct VAT because of the transaction type or BP, not because of the Goods/Services exchanged.

2. Create a Non-Deductible BP (Vendor)

3. and Link "Non-deductible" BP Tax Category to the Non-Deductible BP (vendor, by example) as shown below:

ND Vendor.png

Tax Rates setup

Tax Rates can be setup at Client level, in that case those tax rates apply to any Organization under a Client regardless of Non-Tax Deductible or Tax Deductible scenarios.

For getting tax rates setup, the end-user must navigate to the application path:
Financial Management || Accounting || Setup || Tax Rate || Tax

Next sections describe high-level how different tax rates must be setup.

National Purchase VAT 19% setup

Non-Deductible National Purchase VAT 19% setup

National Sales VAT 19% setup

Exempt Tax Rate

Intra-Community VAT 19%

Intra-Community VAT 19% (19%)

Intra-Community VAT 19% (-19%)

Intra-Community Exempt Sales VAT

"Allow Negative" Setup

In order to get the proper posting in the case of an "Intra-community" Purchase VAT, the "Allow Negative" feature needs NOT to be enabled for the organization's general ledger configuration.

Items Setup

It is important to remark that Items must be linked to the proper Tax Category, which in our case should be "VAT19%"; for doing that end-user must navigate to the application path: Master Data Management || Product || Product

Use Case Scenarios

Tax Non-Deductible Organization

National Purchase

In order to get a National Purchase transaction properly posted for a Tax Non-Deductible Organization, end-user must follow below steps:

Once the invoice is completed and posted, below posting must be shown which means that a Tax Non-Deductible Organization is not allowed to deduct purchase VAT therefore it will posted as an expense:

Account nº Name Debit Credit
440000 Vendor Liabilities 119,00
689000 Product Expense 119,00 (including VAT=19,00)

National Sales

In order to get a National Sales transaction properly posted for a Tax Non-Deductible Organization, end-user must follow below steps:

Once the invoice is completed and posted, below posting must be shown which means that Sales invoices are VAT exempt:


Account nº Name Debit Credit
240000 Account receivable 100,00
531000 Income account 100,00

Intracommunity Purchase

In order to get an Intracommunity Purchase transaction properly posted for a Tax Non-Deductible Organization, end-user must follow below steps:

Once the invoice is completed and posted, below posting must be shown which means that a Tax Non-Deductible Organization is not allowed to deduct purchase VAT therefore it will posted as an expense:


Account nº Name Debit Credit
440000 Vendor Liabilities 100,00
480000 VAT liabilities (-19%) 19,00
689000 Product Expense (including VAT 19%) 119,00

Tax Deductible Organization

National Purchase

In order to get a National Purchase transaction properly posted for a Tax Deductible Organization, end-user must follow below steps:

Once the invoice is completed and posted, below posting must be shown which means that a Tax Deductible Organization is allowed to deduct purchase VAT:


Account nº Name Debit Credit
440000 Vendor Liabilities 119,00
260000 VAT deductible 19,00
689000 Product Expense 100,00

Non-deductible Purchase

In order to get a Non Deductible National Purchase transaction properly posted for a Tax Deductible Organization, end-user must follow below steps:

Once the invoice is completed and posted, below posting must be shown which means that the tax rate which was setup as Non-Deductible tax rate has to be posted as an expense:

Account nº Name Debit Credit
440000 Vendor Liabilities 119.00
689000 Product Expense (including VAT 19%) 119.00

Intracommunity Purchase

In order to get an Intra-community Purchase transaction properly posted for a Tax Deductible Organization, end-user must follow below steps:

Once the invoice is completed and posted, below posting must be shown which means that a Tax Deductible Organization is allowed to deduct purchase VAT:

Account nº Name Debit Credit
440000 Vendor Liabilities 100,00
260000 VAT deductible (19%) 19,00
480100 VAT liabilities (-19%) 19,00
689000 Product Expense 100,00

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