Overview
The VAT Class is used to specify the VAT rates, methods of calculation, and VAT policy to be applied to various transactions.
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VAT Class
Any number of VAT classes may be created for each of the various VAT rates applicable for the Company/Division.
Fields
Division: This defaults to the Division that the user is currently using. VAT Classes are defined within a Division.
VAT Class: The name of the VAT class (e.g VAT 7%, VAT 5%, etc). It is a user-defined alphanumeric identifier up to 20 characters in length.
Description: A brief description of the VAT class (e.g. "Standard Rate"). It is a user-defined alphanumeric identifier up to 100 characters in length.
Exempt Classification: When checked, VAT percent will be set to zero, and no value-added tax entries will be generated.
NOTE When the flag 'Exempt Classification' is checked, the below fields will be updated as:
-
The value of the fields 'VAT Percent', 'Intra-EU Community VAT Percent', and 'VAT Recovery Percent' will be updated to zero.
-
The flag 'Intra-EU Community VAT' will be unchecked.
-
The value of the fields 'Incoming VAT Account', 'Outgoing VAT Account', and 'VAT Clearing Account' will be cleared.
Intra-EU Community VAT: This field indicates that transactions processed using this VAT Class are contained within a community (i.e. the EU). The VAT is calculated and recorded as both incoming and outgoing with no net impact on the transaction amounts.
Incoming VAT Account: The Sub-Ledger account to be debited for Purchases or credited for VAT recovery upon Sales. Sub-Ledger account must have GL Type = Liability Account. If using Rootstock Financials, the associated GL Account must have VAT Account as Incoming, Outgoing, or Both.
Outgoing VAT Account: The Sub-Ledger account used to record outgoing VAT (Sales). Sub-Ledger account must have GL Type = Liability Account. If using Rootstock Financials, the associated GL Account must have VAT Account as Incoming, Outgoing, or Both.
VAT Clearing Account: The Sub-Ledger account to be used when the VAT recognition (defined on SYDEFAULT) is set to Upon Payment. The Sub-Ledger account must have GL Type = Liability Account.
NOTE Make sure that the GL accounts have previously been set up as this is a GL account picklist field. The VAT Accounts are the GL Account used to record VAT transactions. The following fields should be in the GL Accounts (Chart of Accounts).
VAT Percent: Percentage to calculate the value-added tax in transactions associated with this Class.
VAT Recovery Percent: See detailed explanation below (default = 100%).
Intra-EU Community VAT Percent: This is the rate at which the Intra-EU Community VAT transactions are calculated.
PO Price Excludes VAT: See detailed explanation below.
VAT Class is Inactive: This field makes the VAT Class inactive and unavailable for use on any new transactions. (It remains valid on any transactions where it was referenced before being made inactive).
Country Code: This drop-down field carries the ISO Country Code where this VAT Class is used.
Standard VAT Code: This field carries the standardized VAT Code value which can be set to associate a VAT Class with a government standard set of codes.
VAT Recovery Percent
In certain VAT jurisdictions, a business involved in both VAT taxable and VAT exempt activities (i.e. that provide goods/services that are both VAT taxable and VAT exempt) will be entitled to full VAT recovery on costs directly attributable to its taxable activities. It will not have any VAT recovery entitlement on costs directly attributable to its exempt activities. This entity will be entitled to partial VAT recovery on costs used for its taxable and exempt activities.
The VAT recovery percent set up in the VAT class can be overridden when the transaction is captured. For example, in the United Kingdom (UK), you cannot recover input VAT incurred on business entertainment expenses, regardless of the taxable status of your business activities.
PO Price Excludes VAT: When checked, the Purchase Order price entered in the Purchase Order Line does not include VAT. When performing Purchase Order Receipt, the system calculates the Purchase Order price excluding VAT and the amount charged to Inventory in the Rootstock Inventory Cost transaction will be raised at the Purchase Order Price excluding VAT.
Purchase Order Prices can exclude or include VAT.
IMPORTANT Where the PO Price excludes VAT, then the PO Price Excludes VAT must be checked.
IMPORTANT Where the PO Price includes VAT, then the PO Price Excludes VAT must be unchecked.
SEE ALSO
Value Added Tax (VAT) Overview
Value Added Tax (VAT) Setup Requirements
Value Added Tax (VAT) in the Purchase Order Process
Value Added Tax (VAT) in the Sales Order Process
Value Added Tax (VAT) in the General Ledger
