TimingOfVatBooking/Functional Specification Timing of VAT Booking

Contents 1 Overview & Justification 1.1 Purpose 1.2 Scope 1.3 Justification 1.4 New definitions and acronyms 2 Functional Requirements 2.1 Configuration 3 Design & Technical consideration 3.1 Design consideration 3.2 Technical constraints 3.3 Technical Requirements 4 Users & business process description 4.1 User goals 4.2 User Roles and Personas 4.3 Business process diagram 4.4 Business scenario/s 4.4.1 Scenario - Sales Invoice 4.4.2 Scenario - Partial Payments 4.4.3 Scenario - Sales Orders 4.5 Assumptions & Dependencies 4.5.1 Assumptions 4.5.2 Dependencies 5 User interface 5.1 New User Interface 5.2 User interface change 6 License 6.1 License code desription 6.2 Functionality enabled by the license code 7 Discussion items 7.1 Open discussion items 7.2 Closed discussion items 8 Appendix

Overview & Justification

Purpose

The purpose of this document is to describe the Functional Specification for an extension module to be developed in OB ERP version 2.50 called Timing of VAT Booking.

Scope

This module forms part of the booking process flow required by German Universities and describes the booking process for VAT.

Justification

German Universities consist of:

1. entities that belong to the Public Sector.
   1. Booking of purchase invoices in the Public Sector adds VAT to expenses because the Public Sector is not allowed to offset input tax.
   2. VAT is not booked on a separate account, but must be tracked for reporting purposes.
   3. A Public Sector entity of a University is an accounting unit and calculates it's own balance sheet, but also a consolidated balance sheet including the sub-entities, except internal bookings and booking related to other entities (intra-organizational booking).
2. entities which operate like a commercial business = CB ("BgA" = "Betrieb gewerblicher Art").
   1. CB entities must book VAT (and can offset input tax).
   2. Each CB is an accounting unit and calculates its own balance sheet.
   3. Some CBs are not included in the consolidated balance sheet of the University as a whole.

The following graphic illustrates this structure and shows the relationship between Openbravo and a German University Campus Management System:

The German University Campus Management System (H1) is shown on the left, and Openbravo (OB) is shown on the right.

A full description is published in Organizational Structures of Universities. Note: This document is published in a private project. If you require access please request it from the Project Owner.

The booking of VAT (for the CB parts of Universities) belonging to sales invoices could take place at one or two different points in the processing of a sales invoice.

This is to be controlled by an Invoice/Settlement Tax Accounting ("Soll/Ist-Versteuerung") switch. The switch setting is valid for the university as a whole.

1. Invoice Tax Accounting = VAT is booked to the VAT Output Account at the same time of the booking of the invoice. This is the default setting.

1. Settlement Tax Accounting' = VAT is booked to a VAT Transitory Account at the same time of the booking of the invoice. VAT is reversed from the VAT Transitory Account and booked to the VAT Output Account at the same time of the booking of the settlement.

New definitions and acronyms

• "hoheitlicher Bereich" = Public Sector (PS) entity
• "Buchungskreis" = Accounting Unit
• "BgA" = "Betrieb gewerblicher Art" = Commercial Business (CB) entity
• "Soll-Versteuerung" = (translates as "Nominal payment of VAT") Invoice Tax Accounting
• "Ist-Versteuerung" = (translates as "Actual payment of VAT") Settlement Tax Accounting

Functional Requirements

Configuration

• In order to get a diferent VAT booking timing for a commercial unit, a new check-box must be implemented at "Accounting Unit" level (Organization) at the application path: "General Setup || Enterprise || Organization || Organization", named "Post VAT in settlement":
  • If "Post VAT in settlement" check-box is switched on, VAT postig will take place at sales settlement booking
  • If "Post VAT in settlement" check-box is switched off, VAT postig will take place at sales invoice booking
• Besides, a new Tax account named "Transitory Account" must be added at the application path: "Financial Management // Accounting // Setup // Tax Rate - Accounting tab".
  • Transitory Account will only be used in case "Post VAT in settlement" check-box is switched on.
• Finally, and due to the fact that the accounting has been modified, below tables must point to a specific "Accounting Template" at the application path: "Financial Management // Accounting // Setup // Accounting Schema - Account Schema Tables tab":
  • For environments including Advanced Payables and Receivables management functionality:
  • Table = FIN_Payment should have the Accounting Template "Accounting Engine-Financial Payment" linked to it
  • Table = FIN_Reconciliation should have the Accounting Template "Accounting Engine-Financial Reconciliations" linked to it
  • Table = FIN_Finacc_Transaction should have the Accounting Template "Accounting Engine-Financial Transactions" linked to it
  • and Table = Invoice should have the Accounting Template "Accounting Engine-Invoice" linked to it
  • For environments do NOT including Advanced Payables and Receivables management functionality:
  • Table = Invoice should have the Accounting Template "Accounting Engine-Invoice" linked to it
  • and Table = FinancialMgmtSettlement should have the Accounting Template "Accounting Engine-Settlement" linked to it

Design & Technical consideration

Design consideration

Technical constraints

Technical Requirements

Users & business process description

User goals

Automatic booking of VAT at different timing.

User Roles and Personas

Accountant: Stamps a paper document (for example a Purchase Invoice) and indicates how that document should be booked, including the org units.

Business process diagram

N/A

Business scenario/s

For this scenario "Accounting unit BgA" is the entry of the specific orgunit in the ad_org_id field.

Scenario - Sales Invoice

A sales invoice has to be booked at the application path: "Sales Management || Transactions || Sales Invoice || Header", by following below main steps:

• on the header tab, select an org unit = BgA, business partner, etc.
• on the lines tab, enter a sales order line and:
  • select a product, amount = 4.000,00 + VAT = 19%, org unit with parent node BgA (if org unit with parent node HS, then VAT is only for reporting!)
• Complete and Post the sales invoice

The accounts which could be involved are listed below:

• 5230 - account for income
• FaLL - the account of the business partner for receivables
• 4803 - VAT output account (sales tax)
• Temp - VAT Transitory Account
• Bank - a bank account

If the Organization is setup as Post VAT in Settlement = NO, the posting of this invoice must result in the following G/L entries

FaLL - 5230 4.000,00
FaLL - 4803 760,00

On receiving the payment, posting must result in the following G/L entries

Bank - FaLL 4.760,00

If the Organization is setup as Post VAT in Settlement = YES, the posting of this invoice must result in the following G/L entries

FaLL - 5230 4.000,00
FaLL - Temp 760,00

On receiving the payment, posting must result in the following G/L entries

Bank - FaLL 4.760,00
Temp - 4803 760,00

Scenario - Partial Payments

In case of partial payments of a sales invoice, the VAT posting at settlement must take into account and book the right VAT amount depending of the amount being paid.

Scenario - Sales Orders

In case of a payment of a sales order, OB should behave same way as in the case of a sales invoice, see scenario Sales Invoice. Above implies below posting, regardless of sales order posting.

If the Organization is setup as Post VAT in Settlement = NO; Sales Order do not posted.

On receiving the payment, posting must result in the following G/L entries

Bank - FaLL 4.760,00

Later on Invoice posting will look like:

FaLL - 5230 4.000,00
FaLL - 4803 760,00

If the Organization is setup as Post VAT in Settlement = YES; Sales Order do not posted.

On receiving the payment, posting must result in the following G/L entries

Bank - FaLL 4.760,00
Temp - 4803 760,00

Later on, Invoice posting will look like:

FaLL - 5230 4.000,00
FaLL - Temp 760,00

Assumptions & Dependencies

Assumptions

To be added.

Dependencies

To be added.

User interface

New User Interface

n/a

User interface change

New fields in the Organization Dialog:

• "Post VAT in Settlement" checkbox, default value = NO

New field in the Tax Rate accounting tab:

• "Transitory Account", default value = empty

License

License code desription

Openbravo Public Key

Functionality enabled by the license code

Discussion items

Open discussion items

1. In "Design Consideration" section, it is mentioned that there would be two new fields added to client table. But as per the discussion we had recently, these new fields have to be displayed in Organization window. So, the table name client can be replaced by organization. The same have to be done in User Interface Change section also.

2. And there are two new fields like nominal and aggregate to be introduced in organization table. Here nominal is used to decide which type of Tax Accounting is to be done. And what is the business need/significance of aggregate field? Since this field is nowhere present in User Interface.

3. In the Justification section, it is mentioned that The booking of VAT(for the CB part of Universities) belonging to sales invoices could take place at one of two different points in the processing of a sales invoice.

1. Is the Tax Accounting only applicable to Commercial Business Entities?
2. If it is applicable only to Commercial Business Entities, then how VAT is booked/tracked for Public Sector Entities?

4. In "Design Consideration" section, it is mentioned that a new table xxx_bunit has to be created. Here what is the significance this new table and how this table is related to OB application (means relationship to other tables in OB)?

Closed discussion items

1. VAT on Sales Invoices
2. Reason for varying timing of VAT recognition
3. How the accounts will be created?
4. How Nominal/Actual payment will be implemented?

Appendix

N/A