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Tax Templates in Purchase Transactions

This page describes how Tax Templates will be chosen and offered as defaults in Purchase Orders, Goods Receipts and Purchase Invoices.

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Whenever you purchase an Item, you may need to pay VAT and/or other purchase tax, depending on local tax regulations. You will therefore need VAT/tax to be calculated in each transaction, and you will need to account for that VAT/tax in the Nominal Ledger.

In some countries (for example, most countries in Europe), each Item that is purchased (e.g. each row in an Invoice) will be taxed at a single rate. In this situation, you can use VAT Codes to calculate and account for the tax. Each row in the Invoice will have its own VAT Code. For example, an Item that is taxed at the national standard rate will have a VAT Code that calculates VAT/tax at that rate, while a zero-rated Item will have a different VAT Code that calculates VAT/tax at a 0% rate.

In other countries (for example, Brazil and the US), each Item that is sold will be taxed using different taxes and/or several tax rates. In this case, you should use Tax Templates to calculate and account for the tax. A Tax Template allows you to apply several taxes to a single transaction (e.g. to a single row in an Invoice). A Tax Template is a tax structure, built up using a number of VAT Codes.
If you need to use Tax Templates, you should select the Use Tax Templates for Tax Calculation option in the Transaction Settings setting in the Nominal Ledger. Wherever a VAT Code (or "V-Cd") field would appear, this option will cause a Tax Template (or "T-Cd") field to appear instead. You should also decide whether to use the Combine Tax Templates from Items and Contacts option in the same setting: this option should be used if you sell into areas with different tax regimes (e.g. out-of-county sales in some states in the US).

Purchase Orders and Goods Receipts

If you are not using the Combine Tax Templates from Items and Contacts option and you purchase an Item (i.e. whenever you specify an Item in a row in a Purchase Order or a Goods Receipt), a Tax Template for that purchase will be brought in to the T-Cd field (on flip A of the Purchase Order row and flip C of the Goods Receipt row). That Tax Template will be chosen as follows:
  1. The Purch. Tax Template specified in the Contact record for the Supplier will be used.

  2. The Tax Template specified in the Item record will be used.

  3. The Tax Template specified in the Item Group to which the Item belongs will be used.

  4. The Tax Template specified on the 'VAT' card in the Account Usage P/L setting will be used.

  5. The Tax Template will be taken from the Contact record for the Branch (Purch. Tax Template field).
In cases 2-4, the choice of Tax Template will depend on the VAT Zone of the Supplier, which you should specify on the 'Company' card of the Contact record for the Supplier.

If you are using the Combine Tax Templates from Items and Contacts option, two or more Tax Templates separated by commas will be brought in to the T-Cd field in the Purchase Order or Goods Receipt row. Usually one of these Tax Templates will represent the Supplier and one will represent the Item.

  1. The Tax Template representing the Supplier will be chosen as follows:

    1. The Purch. Tax Template specified in the Contact record for the Supplier will be used.

    2. The Tax Template will be taken from the Contact record for the Branch (Purch. Tax Template field).

    3. The Tax Template will be taken from the 'VAT' card in the Account Usage P/L setting.

  2. The Tax Template representing the Item will be chosen as follows:

    1. The Tax Template will be taken from the Item record.

    2. The Tax Template will be taken from the Item Group to which the Item belongs.

    3. The Tax Template will be taken from the 'VAT' card in the Account Usage P/L setting.
You will be able to change the choice of Tax Template in a particular Purchase Order or Goods Receipt row if necessary.

Purchase Invoices

If you create a Purchase Invoice from a Purchase Order or Goods Receipt, the tax Templates will be transferred to the Invoice. If you enter a Purchase Invoice without reference to a Purchase Order or Goods Receipt (i.e. you enter it directly to the Purchase Invoice register), the choice of Tax Template in each row will not depend on the Item but on the Cost Account. If you are not using the Combine Tax Templates from Items and Contacts option, the Tax Template will be chosen as follows:
  1. The Purch. Tax Template specified in the Contact record for the Supplier will be used.

  2. The Tax Template specified in the Account record will be used.

  3. The Tax Template specified on the 'VAT' card in the Account Usage P/L setting will be used.

  4. If there is a Branch on the 'Comment' card of the Purchase Invoice, the Purch. Tax Temp. from the Contact record for that Branch will be used.
In the third case, the choice of Tax Template will depend on the VAT Zone of the Supplier.

If you are using the Combine Tax Templates from Items and Contacts option, two or more Tax Templates separated by commas will be brought in to the T-Cd field in the Purchase Invoice row. Usually one of these Tax Templates will represent the Supplier and one will represent the Account.

  1. The Tax Template representing the Supplier will be chosen as follows:

    1. The Purch. Tax Template specified in the Contact record for the Supplier will be used.

    2. The Tax Template will be taken from the Contact record for the Branch (Purch. Tax Template field).

    3. The Tax Template will be taken from the 'VAT' card in the Account Usage P/L setting.

  2. The Tax Template representing the Account will be chosen as follows:

    1. The Tax Template will be taken from the Account record.

    2. The Tax Template will be taken from the 'VAT' card in the Account Usage P/L setting.
Again, you will be able to change the choice of Tax Template in a particular Invoice row if necessary.

Please refer here for more details about Tax Templates.

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