Applying a Pending VAT: General Information

On the Taxes (TX205000) form of MYOB Advanced, you can configure a value-added tax (VAT) of the Pending type to be applied to those documents whose tax amounts should be recognized after the document has been released. Once a document that is subject to a Pending VAT is released, the system records its tax amount to an intermediate account (such as the Pending Tax Payable account or the Pending Tax Claimable account), where the tax amount is kept until a user initiates the process of recognizing the taxes. For details on configuring a value-added tax of the Pending type, see Value-Added Taxes: To Create a Pending VAT.

When you run the recognition process, the system generates a GL transaction that moves the tax amount from the intermediate (pending) account to the actual Tax Payable or Tax Claimable account.

Note: The tax amounts recorded to the pending accounts are not included in the tax report. Only when the recognition of taxes is performed does the system include the corresponding tax information in the tax report of the appropriate period.

The functionality related to value-added taxes is available only if the VAT Reporting feature is enabled on the Enable/Disable Features (CS100000) form.

Learning Objectives

In this chapter, you will learn how to do the following:

  • Process an AR invoice with a pending VAT
  • Process partial payments for the invoice
  • Recognize the pending output VAT
  • Prepare and release a tax report
  • Reconcile the balance of the Pending Tax Payable account in the general ledger and in the tax subledger

Applicable Scenarios

You process documents with pending VATs and recognize this type of VAT if the taxation laws of your country require VATs to be recognized not on the invoice date, but at a later time, such as when a payment is received or when services are provided.

Tax Recognition Methods

In MYOB Advanced, you can use either of the following methods of recognizing the pending value-added taxes:

  • On Documents: With this recognition method, the total tax amount of a document can be recognized on any needed date. The system does not take into account payments in this case. You load the released documents with the pending VAT applied on the Recognize Output VAT (TX503000) or Recognize Input VAT (TX503500) form, and then initiate the recognition process.
  • On Payments: With this recognition method, the tax amount is recognized only when a payment is applied to a document. The tax amount can be recognized fully or partially, depending on whether the applied payment fully or partially covers the document amount. The partial tax amount to be recognized, if applicable, is calculated proportionally to the payment applied to a document. You load the released applications on the Recognize Output VAT or Recognize Input VAT form, and then initiate the recognition process for one application or multiple applications. Each tax amount is recognized on the date when the payment has been applied to document.

Setup of Recognition Methods

To set up the recognition process, you specify the appropriate recognition method for each required tax agency on the Tax Agency tab of the Vendors (AP303000) form. In the VAT Recognition Method box, you select either On Documents or On Payments.

You also select how the system assigns reference numbers to pending VAT entries generated by the Recognize Output VAT and Recognize Input VAT processes by selecting appropriate values in the Output Tax Entry Ref. Nbr. and Input Tax Entry Ref. Nbr. boxes respectively.

Before you initiate the VAT recognition process on the Recognize Output VAT (TX503000) or Recognize Input VAT (TX503500) form, you select a tax agency in the Tax Agency box. The system inserts the recognition method of the selected tax agency in the VAT Recognition Method box. If needed, you can change the recognition method manually before you run the recognition process.

Recognition of the Pending VAT on Documents

By using the On Documents VAT recognition method, you recognize tax amounts calculated in the unpaid documents that are subject to pending VAT. You can initiate the recognition process by using any needed date.

You initiate the process of recognizing the pending VAT on the Recognize Input VAT (TX503500) or Recognize Output VAT (TX503000) form, depending on whether input or output taxes should be recognized.

On one of these forms, you specify the following selection criteria, which the system uses to load the documents:

  • Date: The documents with a date earlier than or the same as the specified date are loaded. By default, the current business date is specified. To load the documents with any date to the form, clear this box.
  • Branch: The branch from which documents are loaded.
  • Tax Agency: The tax agency that is associated with the tax of the Pending type to be processed.
  • Tax ID: The tax code that was used for calculating the tax amounts to be recognized by the process. Only the tax codes associated with the selected tax agency are available for selection. You can leave this box empty, so that the documents subject to all available pending taxes associated with the agency will be loaded.

In the Selection area, you should also make sure the VAT Recognition Method is On Documents. By default, the option specified for the tax agency you have selected is shown.

Once the documents are loaded to the table, you select one item or multiple items in the list, and initiate the process by clicking Process on the form toolbar. (To process all listed items, you click Process All.)

Note: For each document to be processed, the Tax Doc. Nbr value should be specified in the table. This number is either inserted by the system automatically or entered by a user manually, depending on the option specified for the tax agency in the Input Tax Entry Ref. Nbr. or Output Tax Entry Ref. Nbr. box on the Tax Agency tab of the Vendors (AP303000) form.

When you run the process of recognizing the pending VAT, the system generates a GL batch (or multiple batches) to move the tax amounts from the pending accounts to the actual tax payable (or tax claimable) accounts.

Recognition of the Pending VAT on Payments

In certain countries, there are legal requirements that VAT must be recognized, accrued, and included in the tax report at the time of payment.

To satisfy these requirements, in MYOB Advanced, you can use the On Payment VAT recognition method. With this method, you recognize tax amounts based on the payments applied to documents, so the tax amount of a document is recognized on the date when the payment was applied to that document.

You can recognize the tax amount fully or partially, depending on whether the payments completely or partially cover the amount of the document. If the document is paid partially, the tax amount to be recognized is calculated proportionally to the applied payment.

You initiate the process of recognizing the pending VAT on the Recognize Input VAT (TX503500) or Recognize Output VAT (TX503000) form, depending on whether input or output taxes should be recognized.

On one of these forms, you specify the following selection criteria, which the system uses to load applications to the table:

  • Date: Applications with a date earlier than or the same as the specified date are loaded. By default, the current business date is specified. To load the applications with any date to the form, clear this box.
  • Branch: The branch for which documents (such as AR invoices) are paid.
  • Tax Agency: The tax agency that is associated with the tax to be processed.
  • Tax ID: The tax code that was used for calculating the tax amounts to be recognized by the process. Only the tax codes associated with the selected tax agency are available for selection. You can leave this box empty, so that the documents subject to all available pending taxes associated with the agency will be loaded.

In the Selection area, you should also make sure the VAT Recognition Method is On Payments. By default, the option specified for the tax agency you have selected is shown.

Once the applications are loaded to the table, you select one item or multiple items in the list, and initiate the VAT recognition process by clicking Process on the form toolbar. (To process all listed items, you click Process All.)

Note: For each payment to be processed, the Tax Doc. Nbr. value should be specified in the table. This number is either inserted by the system automatically or entered by a user manually, depending on the option specified for the tax agency in the Input Tax Entry Ref. Nbr. or Output Tax Entry Ref. Nbr. box on the Tax Agency tab of the Vendors (AP303000) form.

If you have reversed a payment application (that is, a payment applied to a document subject to pending VAT), you have to process the reversal of the application on the Recognize Output VAT or Recognize Input VAT form.

When you run the process of recognizing the pending VAT, the system generates a GL batch (or multiple batches) to move the tax amounts from the pending accounts to the actual tax payable (or tax claimable) accounts.

If only partial payment has been applied to a listed document, the system calculates the amount of the tax to be recognized proportionally to the payment that was applied to the document amount.