Article

Article Body

Overview

This article describes how VAT is processed / recorded in the Sales Order process. Note that in the Sales Order Process, VAT is processed in two distinct ways:

If the Sales Order Price method is EXCLUDING VAT (i.e. VAT is added to the price quoted), then the VAT rate used is derived from the Tax Location object and set using the Tax Location field on the Sales Order line in the Sales Order Line Ship-To Settings Tab.
If the Sales Order Price method is INCLUDING VAT (i.e. VAT is included in the Price quoted), then the VAT rate used is derived from the VAT Class object and set using the VAT Class field on the Sales Order line in the Sales Order Line Ship-To Settings Tab.

As a result of the above, when setting up VAT, a user should first determine the Pricing methodology and then set up VAT according to the pricing methodology used (See Value Added Tax (VAT) Setup Requirements)

Navigation

Sales Order Entry
Sales Order Invoice

Processing

Sales Orders (where Pricing methodology = EXCLUDING VAT) - use Tax Locations

When creating and managing Sales Order Lines, the Tax Location field in the Ship-To-Settings TAB determines the VAT charged for the Sales Order. This field is populated using the standard Tax location assigned to either the Customer, Shipping Zone, Sales Division. It can be overriden if a different rate is to be assigned to / used for the Sales Order Line (Sales Order Line Ship-To Settings Tab).

NOTE Ensure that the VAT Class field in the Ship-To-Settings TAB, is shown as 'None'.

Tax locations are set / can be defined on various objects noted (see Value Added Tax (VAT) Setup Requirements):

Sales Orders (where Pricing methodology = INCLUDING VAT) - use VAT Class

When creating and managing Sales Order Lines, the VAT Class field in the Ship-To-Settings TAB determines the VAT charged for the Sales Order. This field is populated using the VAT Class assigned to either the Customer, Product, Product Group & Division Master. It can be overriden if a different rate is to assigned to / used for the SO line (Sales Order Line Ship-To Settings Tab).
VAT Classes are set / can be defined on various objects (see Value Added Tax (VAT) Setup Requirements)
Products with a VAT Class designated as Exempt and those with a zero VAT Percentage are bypassed when processing the SO Invoice

NOTE Regarding VAT / Tax Exempt processing:

Existing ‘Tax Exempt’ indicators on the Customer , Product, Sales Order Header and Sales Order Line are all honored for Value Added Tax just as they are for Sales Tax.
There are also ‘Exempt from VAT’ indicators on the Customer Address and the Sales Order Address Overrides (Ship-To Addresses only) which carry thru to the Shipper object – and Shippers marked as exempt are not processed for VAT.

When Sales Invoices (SO Invoice and Credit Memos) are 'Approved', calculations are made to determine and accommodate VAT amounts as part of the account distribution that normally occurs at that time.

First, candidate Invoice Lines are determined, which are those where the Shipper has not been designated VAT Exempt, nor has Line been designated as Tax Exempt.
The VAT Amount is directed to the Liability Account defined on the VAT Class or Tax Location and the remainder sent to the Revenue Account

NOTE For Sales Invoices in environments using VAT ('VAT Active' flag is checked on System Defaults), the 'Discount Amount' value is calculated once the Invoice is 'Approved'. Non-approved Invoices will have a 'Discount Amount' of zero .

Title	Value Added Tax (VAT) in the Sales Order Process

URL Name	VAT-in-the-Sales-Order-Process

Value Added Tax (VAT) in the Sales Order Process