Applying Reverse VAT: Process Activity

The following activity will walk you through the processing of a purchase with a reverse VAT applied to it.

Story

Suppose that on February 1, 2024, SweetLife Fruits & Jams purchased office supplies to be used in the company's office from Cartridge World Inc. Further suppose that the vendor is not registered with tax authorities for paying VAT. SweetLife Fruits & Jams will pay the VAT on the purchase and will later claim it from the tax agency.

Acting as a SweetLife accountant, you need to process an AP bill to which a reverse VAT is applied and prepare a tax report for the 02-2024 period to make sure that these amounts are reflected there correctly.

Configuration Overview

In the U100 dataset, the following configuration tasks have been performed to prepare the system for this activity to be performed:

  • On the Enable/Disable Features (CS100000) form, the VAT Reporting feature has been enabled.
  • On the Vendors form, the CARTRIDGE vendor has been configured.

Process Overview

In this activity, on the Bills and Adjustments (AP301000) form, you will process an AP bill with a reverse VAT applied to it. On the Prepare Tax Report (TX501000) form, you will prepare a tax report for the 02-2024 period and review the prepared report on the Release Tax Report (TX502000) form.

System Preparation

To prepare the system, do the following:

  1. Launch the MYOB Acumatica website, and sign in to a company with the U100 dataset preloaded. You should sign in as an accountant by using the johnson username and the 123 password.
  2. In the info area, in the upper-right corner of the top pane of the MYOB Acumatica screen, set the business date in your system to 2/1/2024.
  3. On the company and branch selection menu, on the top pane of the MYOB Acumatica screen, select the SweetLife Head Office and Wholesale Center branch.
  4. As a prerequisite activity, be sure that you have created the CANADA tax zone on the Tax Zones (TX206000) form as described in Tax Zones and Categories: To Create a Tax Category and Tax Zone for VAT.
  5. As a prerequisite activity, be sure that you have configured the VATVAR tax agency as described in Tax Report Configuration: To Create a Tax Report for VAT Variations.
  6. As a prerequisite activity, be sure that you have configured a tax report on the Reporting Settings (TX205100) form and have added reporting groups to the tax report. For details, see Tax Report Configuration: To Create a Tax Report for VAT Variations.
  7. As a prerequisite activity, in the company to which you are signed in, be sure you have configured a reverse VAT and a general VAT as described in Value-Added Taxes: To Create a Reverse VAT.
  8. As a prerequisite activity, be sure that you have specified the CANADA tax zone for the CARTRIDGE vendor on the Vendors (AP303000) form as described in Applying Deductible VAT: Process Activity.

Step 1: Processing an AP Bill

To process an AP bill with a reverse VAT applied to it, do the following:

  1. On the Bills and Adjustments (AP301000) form, create a new record.
    Tip:
    To open the form for creating a new record, type the form ID in the Search box, and on the Search form, point at the form title and click New right of the title.
  2. In the Summary area, specify the following settings:
    • Type: Bill
    • Vendor: CARTRIDGE
    • Date: 2/1/2024 (inserted by default)
    • Post Period: 02-2024
    • Description: Office supplies
  3. On table toolbar of the Details tab, click Add Row and specify the following settings for the added row:
    • Branch: HEADOFFICE
    • Ext. Cost: 750
    • Account: 81000 - Other Expenses
    • Tax Category: REVERSE
  4. On the form toolbar, click Save.
  5. Review the Taxes tab. The applicable taxes with the same tax rate belong to groups of different types (GVAT to the Input group and REVVAT to the Output group), so the calculated tax amounts offset each other. Thus, the document balance is not changed, and no tax is paid to the vendor. The recorded tax and taxable amounts will be included in the tax report. The REVVAT tax will later be paid to the tax authority and the GVAT tax can be claimed, if this is allowed.
  6. On the form toolbar, click Remove Hold and click Release to release the bill.
  7. On the Financial tab, click the Batch Nbr. link and on the Journal Transactions (GL301000) form, which opens, review the generated GL transaction. On release of the AP bill, the system generated the following entries:
    • The Accounts Payable account of the vendor (20000) is credited in the amount of the bill (which is equal to the purchase amount).
    • The expense account specified in the document line (81000) is debited in the amount of the line to record the expenses.
    • The Tax Claimable account specified for the input tax (17000) is debited in the amount of the input tax (GVAT).
    • The Tax Payable account specified for the output tax (24100) is credited in the amount of the output tax (REVVAT).

Step 2: Preparing a Tax Report

To prepare a tax report for the 02-2024 period, do the following:

  1. Open the Prepare Tax Report (TX501000) form.
  2. In the Summary area, specify the following settings:
    • Company: SWEETLIFE
    • Tax Agency: VATVAR
    • Tax Period: 02-2024 (selected automatically)
  3. On the form toolbar, click Prepare Tax Report.
  4. On the Release Tax Report (TX502000) form, which opens, review the prepared tax report.

    The calculated reverse VAT amount is equal to the VAT amount on standard-rated acquisitions, so the net tax to be paid or reclaimed has not changed.

  5. On the form toolbar, click Void Report.