This article describes how Value Added Tax (VAT) is processed in a Payable Transaction. Please also refer to Payable Transaction for detailed information on Payable Transaction processing.
In various VAT regulatory environments, VAT may be included in the vendor Invoice line amount (i.e. VAT is included in the line value) and in other jurisdictions, the line amount does not include VAT (VAT is added to the full invoice total and reflected at the bottom of the Vendor Invoice). In order to cater to these two situations, VAT may be processed in two different ways when processing a Payable Transaction.
When VAT is applicable, the following steps are to be followed:
Enter the Total value (including VAT) of the Vendor document (Invoice, Vendor Credit, Vendor Debit) in the Transaction Total (Txn Currency) field. For example
VAT Invoice where line amount excludes VAT:
Invoice - line value = 100
VAT = 10
Total Invoice amount = 110 (ENTER This amount in the Transaction Total (Txn Currency) field)
VAT Invoice where line amount includes VAT:
Invoice - line value [including VAT] = 110
Total Invoice amount = 110 (ENTER This amount in the Transaction Total (Txn Currency) field)
When entering Lines, the lines may be processed in two distinct ways:
Where the document line amount / amounts are EXCLUDING VAT (i.e. VAT is added to the document line amount), then enter the line amount (100 per example 1 above) and select the appropriate VAT class where the Value Added Tax (VAT) ClassPO Price Excludes VAT field is checked (TRUE). The distributions will be calculated and the Amount field on the line will be updated.
Where the document line amount / amounts are INCLUDING VAT (i.e. VAT is already included in the document line amount), then enter the line amount [which will include VAT] (110 per example 2 above) and select the appropriate VAT class where the Value Added Tax (VAT) ClassPO Price Excludes VAT field is not checked (FALSE). The distributions will be calculated and populated.
Other than the above, the rest of the Payable Transaction process remains unchanged.
When the VAT Class selected on the Payable Transactions Line is an Intra EU VAT class - that is, if the checkbox Intra-EU Community VAT is set to true on the selected VAT Class - then the Intra-EU Community VAT Percent rate is used.
This VAT Class creates two VAT distribution records on the Payable Transaction Line upon Posting the Payable Session:
Debit VAT Input
Credit VAT Output
The GL Account values used on the distribution records, for the Debit VAT Input and Credit VAT Output are fetched from the VAT class.
The 'Incoming VAT Account' is used on the Debit VAT Input
The ‘Outgoing VAT Account’ is used on the Credit VAT Input
The amount calculated on these two distribution record is as follows:
Line amount * Intra-EU Community VAT Percent
NOTE The value mentioned on the field ‘Intra-EU Community VAT Percent’ on the VAT class is used only when the checkbox ‘Intra-EU Community VAT’ is set to true.
