AR Documents with VAT: General Information

If a value-added tax with the Output group type has been configured on the Taxes (TX205000) form, the system automatically calculates VATs, if they apply to the customer's tax zone and an item's tax category, for the following documents and document types on the Invoices and Memos (AR301000):

• Invoice
• Credit Memo
• Debit Memo
• Credit WO

Learning Objectives

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

• Create and release an AR invoice with a VAT applied
• Process an AR invoice with a cash discount and a VAT applied
• Pay an invoice within the cash discount period and review the GL transactions generated by the system
• Create and process a credit memo with a VAT applied

Applicable Scenarios

You create an AR invoice with at least one VAT applied to record a sale subject to VAT. You create a credit memo with a VAT applied if you need to decrease the customer's balance and the amount of taxes payable to the tax agency.

Applying VAT to AR Documents

After you have configured all the required configuration entities (tax zones, categories, tax agency accounts, and taxes), the value-added taxes are automatically applied to taxable AR invoices and debit and credit memos if all of the following conditions are met:

• The date of the document is the same as or later than the effective date of the tax.
• The tax zone specified in the document includes the tax. By default, the tax zone is copied from the settings of the customer's account. If a tax zone is not specified for the customer, the system uses the tax zone that is specified in the settings of the selling branch (if a tax zone is specified for the branch). If needed, you can manually override the tax zone in the document.
• The tax category specified in the document line includes the tax. If a stock or non-stock item is selected in the document line, the tax category of the item is used for the line. If no item is specified in the document line, the default category of the tax zone specified for the document is used for the line. If needed, you can manually override the tax category in the document line.

The system calculates the tax and taxable amounts by using the settings of each tax that corresponds to both the tax category of the specified inventory ID and the tax zone of the selected customer. The system calculates the tax and taxable amounts for each line of the document or for the total document amount, depending on the settings of the applied tax (for details, see Value-Added Taxes: To Create a General VAT and Exempt VAT). The system inserts the VAT amount in the Tax Total box in the Summary area of the Invoices and Memos (AR301000) form.

Once any taxable invoice is released, the system updates the GL account balances and the corresponding amounts in the tax report.

Applying VAT to AR Documents with Cash Discounts

If an AR document includes a cash discount, the system applies the cash discount percent depending on the Cash Discount Base setting on the Company Details tab of the Companies (CS101500) form:

• If Document Amount is selected, the cash discount percent is applied to the total amount of a document, which is the purchase price or sales price plus the VAT amount.
• If Document Amount Less Taxes is selected, the cash discount percent is applied to the taxable amount of the document. The VAT amount calculated for the document will be the same regardless of whether a cash discount is applied to the document.

For details on calculating cash discounts, see Setup and Calculation of Cash Discounts.