Talk:How to manage VAT settlement and payment
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Objective
In this section I'd say something like:
There are several taxes which affects companies running business, taxes such as corporation tax, income tax, value added tax, etc.
Value Added Tax or VAT tax is a tax which must be settled regularly with the tax authority. The way to do that is:
- the company has to properly account the output VAT or VAT collected on sales within a given period. (In Spanish IVA repercutido)
- Customer Receivable $X.XXX,XX
- Product Revenue $X.XXX,XX
- Tax Due (Output VAT) $X.XXX,XX
- besides the company has to properly account the Input VAT or VAT paid on purchase within the same period of time. (In Spanish IVA soportado)
- Product Expense $X.XXX,XX
- Tax Credit (Input VAT) $X.XXX,XX
- Vendor Liabilty $X.XXX,XX
At the end of the period:
- if the Output VAT > Input VAT, the company has to pay the difference to the tax authorities:
- Tax Due (Output VAT) $X.XXX,XX
- Tax Credit (Input VAT) $X.XXX,XX
- Tax authority (VAT creditor) $X.XXX,XX
- and make the payment:
- Tax authority (VAT creditor) $X.XXX,XX
- Bank $X.XXX,XX
- if the Input VAT > Output VAT, the tax authorities have to pay or compensate the difference to the company:
- Tax Due (Output VAT) $X.XXX,XX
- Tax authority (VAT debtor) $X.XXX,XX
- Tax Credit (Input VAT) $X.XXX,XX
- in case of compensation:
- Tax Due (Output VAT) $X.XXX,XX
- Tax Credit (Input VAT) $X.XXX,XX
- Tax authority (VAT creditor) $X.XXX,XX
- Tax authority (VAT debtor) $X.XXX,XX
- in case of payment:
- Bank $X.XXX,XX
- Tax authority (VAT debtor) $X.XXX,XX
--Psanjuan 10:33, 24 July 2012 (UTC)
New Feedback:
Why you did not copy/paste the accounting above? I've already done it.
--Psanjuan 14:34, 27 July 2012 (UTC)
Recommended articles
Here I would add:
the way to properly account Output VAT in Sales Sales Invoice accounting
and the way to properly account Input VAT in Purchase Purchase Invoice accounting
Besides, I'd say:
Managing taxes requires a clear understanding on how Tax Categories and Tax Rates work in Openbravo.
--Psanjuan 10:48, 24 July 2012 (UTC)
I would remove this part as it has to be described in the execution steps as the required setup
The following set ups are required for the Tax Settlement and Payment process:
- Business Partner:The setup of a Business Partner for the Tax Authorities that is both a customer and a vendor, because it could be required to pay to the tax authority or the authorities may have to pay to the company. The default Payment Method and the default Financial Account are set up in both the “Customer sub tab” and the “Vendor sub tab” of the Business Partner window.
- GL item:
- G/L Item Name: “Tax Payment”
- A G/L debit and a G/L credit account should be entered in the Accounting tab
- Tax Register Type (as explained below)
--Psanjuan 10:55, 24 July 2012 (UTC)
New feedback:
I've rephrased a little bit. It's ok.
--Psanjuan 14:39, 27 July 2012 (UTC)
Execution Steps
I'd say that:
The company in this example will have to setup Openbravo to get the VAT payment process working properly. This process will help the company to settle the VAT for a given period of time, for instance from July 1st to July 31st, and make the corresponding payment to the tax authorities.
--Psanjuan 11:00, 24 July 2012 (UTC)
Tax authority creation
Please explain here the way to create "Tax Authority" as a Vendor/Customer in Openbravo. And explain how it is going to be used in this process.
--Psanjuan 11:05, 24 July 2012 (UTC)
New Feedback:
I think you did not properly apply my feedback as it was not clearly explained how to create a BP which is both a customer and a vendor.
It is also required to explain the role tax authorities play in this process, that is the reason why I've specified that the payment method and the financial account must be entered for receiving or making the payment.
--Psanjuan 14:52, 27 July 2012 (UTC)
VAT Payment setup
Explain here the way to create the VAT Payment as a GL item, explain why and how it is going to be used in the process.
Put the link to where GL items are explained in the User Guide: GL Item
- the GL Item name can be : “VAT Payment”
- A GL debit and a GL credit account should be entered in the Accounting tab, by example (472 for Debit and 477 for Credit)
Above accounts are NOT correct:
- In the Debit it should be an account for "Tax Authorities (VAT debtor)" and in the credit an account fro "Tax Authorities (VAT Creditor". In Spanish:
- Hacienda Pública deudor por IVA
- Hacienda Publica acreedor por IVA
--Psanjuan 09:09, 24 July 2012 (UTC)
New feedback:
Please do not put:
Please check Openbravo wiki when more information about how to create a GL item is needed.
but just
G/L items are created in the GL Item window.
--Psanjuan 14:55, 27 July 2012 (UTC)
I've rephrased a little bit and I have removed the image as it is not needed.
--Psanjuan 15:04, 27 July 2012 (UTC)
Tax Register Type setup
Remove the part already described which is the GL item creation.
--Psanjuan 11:32, 24 July 2012 (UTC)
Explain that the company has to create two records in the Tax Register Type window, one for the purchase VAT or Input VAT and the other one for the Sales VAT or Output VAT.
Explain also the reason why. The reason for doing that is because each of them will have the corresponding taxes to take account while running the process to settle the VAT.
--Psanjuan 11:33, 24 July 2012 (UTC)
Please see inline below:
- Create a new record
- Register name: Purchase Tax (psanjuan: it should be Purchase VAT)
- GL item : Tax Payment (psanjuan: it should be VAT payment)
- Navigate to Lines and create a new record as described below: (psanjuan:You should say that a new record will have to be created for each VAT and document type)
- Tax: select the “Purchase Taxes” to take into account by example: “CA Purchase Tax” (psanjuan: Why are you putting this?? This article is describing the Spanish VAT and even more the image shows a Purchase VAT for Spain)
- Document type: select the “Purchase document” to take into account by example: “AP Invoice”. (Remark that other documents should also be selected AP Credit Memo and Reversed Purchase Invoice)
- Save the record
- Go back to header and create a new record for “Sales Tax and Sales Transactions” (psanjuan: Put just Sales VAT)
- Register name: Sales Tax (psanjuan: it should be Sales VAT)
- GL Item: Tax Payment (psanjuan: it should be VAT payment)
- Select the flag: Sales Transactions
- Navigate to Lines and create a new record as described below: (psanjuan: same feedback as above)
- Tax: select the “Sales Taxes” to take into account by example: “CA Sales Tax”
- Document type: select the “Sales document” to take into account by example: “AR Invoice”
- Save the record
--Psanjuan 11:41, 24 July 2012 (UTC)
New Feedback:
You did not properly take my feedback so I've rephrased. Please take a look.
--Psanjuan 15:22, 27 July 2012 (UTC)
Tax Payment
Please mention here that the company run the business and makes purchase and sales from July 1st to July 31st. Those purchase and sales transactions include VAT and besides the company is allowed to recover 100% of the Output VAT or Purchase VAT.
--Psanjuan 11:44, 24 July 2012 (UTC)
Put the link to where this is explained in the user guide Tax Payment
--Psanjuan 11:45, 24 July 2012 (UTC)
When you say:
"Now, it’s time to Process the tax payment." You should also explain how to POST it. What it is posted is the GL Journal.
--Psanjuan 11:45, 24 July 2012 (UTC)
Shows the G/L Journal image with the right accounts.
--Psanjuan 11:46, 24 July 2012 (UTC)
Please show the posting of both the tax payment transaction and the payment to the government.
--Psanjuan 11:50, 24 July 2012 (UTC)
We need to add another section. A section which describes how to do it in case the company does not have to pay to the tax authorities but the other way around.
--Psanjuan 11:55, 24 July 2012 (UTC)
New Feedback:
You did not properly take into account my feedback so I've rephrased. Please take a look.
--Psanjuan 16:13, 27 July 2012 (UTC)