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VAT Codes

Whenever you buy or sell an Item, you will need to charge or pay VAT in order to comply with local VAT regulations. You will therefore need to calculate VAT in each transaction, and you will need to account for that VAT in the Nominal Ledger. You also need to account for VAT differently in domestic, EU and foreign transactions.

The VAT Codes setting provides the basis for all VAT calculations in Standard ERP. In this setting, you should enter separate VAT Code records for each VAT rate. As well as the VAT rate, you should specify Output and Input Accounts for each VAT Code. The Output Account is the Account that will be credited with the VAT value when you sell an Item, while the Input Account will be debited with the VAT value whenever you purchase an Item. You can define as many VAT Codes as you need, with different accounting specifications.

After defining your VAT Codes, you should then go to the 'Sales' card in the Account Usage S/L setting and the 'VAT' card in the Account Usage P/L setting to specify the default VAT Codes that will be used in most situations. You can also specify VAT Codes in each Item Group and in each Item, but this is only necessary for Items for which the default VAT Codes are not appropriate (e.g. zero-rated Items). You can also specify VAT Codes in each Sales and Cost Account. On the sales side, doing so and selecting the VAT Code Control option in the Account Usage S/L setting will provide a measure of control that the correct VAT Code will always be used. On the purchase side, when entering a Purchase Invoice, the VAT Code in a Cost Account will override the default VAT Code specified in the Account Usage P/L setting. An additional option is to specify Sales and Purchase VAT Codes in the Contact records for your Customers and Suppliers but you should only do so for Customers and Suppliers to whom your usual VAT accounting method does not apply (e.g. Customers who should not be charged VAT, such as (in the UK) charities). This configuration will ensure that VAT is calculated correctly in sales and purchase transactions and posted to the correct Nominal Ledger Accounts.

The posting of VAT from a Sales or Purchase Invoice depends on the VAT Code and on the VAT Zone in the Invoice. VAT will be calculated using the percentage specified in the VAT Code, and it will posted to the Output or Input Account also specified in the VAT Code. However, VAT will not be posted from Sales Invoices in the Inside EU or Outside EU VAT Zones or from Purchase Invoices in the Outside EU VAT Zone. VAT from Purchase Invoices in the Inside EU VAT Zone will be posted to both the Output or Input Accounts (i.e. Reverse Charge VAT). The VAT Zone in an Invoice will be taken from the 'Company' card in the Contact record for the Customer or Supplier.

Please refer here for examples describing the use of VAT Codes in Purchase Invoices, and here for details about using VAT Codes in the VAT Report definition, together with examples.

If a national VAT rate is changed, it is not recommended that you change the rates in your existing VAT Codes, because this will mean that VAT may not be calculated correctly when reporting on old transactions. Instead, you should create new VAT Codes for the new rates, and copy the new VAT Codes to all settings, records and report definitions. Be careful when duplicating transaction records (e.g. Invoices, Purchase Invoices, Sales Orders, Purchase Orders, etc) as there will be a risk that the old VAT Codes will be copied to the new transactions. Similarly, change the VAT Codes in older Orders and Quotations before creating new Invoices. In Portugal, you should also enter Valid Until dates for the old VAT Codes (on flip E), to satisfy a SAF-T reporting requirement.

A file containing the standard VAT Codes used in the UK is supplied with Standard ERP. If you want to use this example as a template for your own definitions, import the relevant file (named "UKACCS1.TXT" in the UK) as described on the Importing Set-up Data page.

In some countries (for example, Brazil and the US), each Item that is bought or sold (e.g. each row in an Invoice) will be taxed using different taxes and/or several tax rates. In other words, each Item will be subject to several taxes. In this situation, you should enter each individual tax in the VAT Codes setting. You should then create Tax Templates that use the VAT Codes. A Tax Template is a tax structure, built up using a number of VAT Codes. If you need to calculate tax using Tax Templates, you should also select the Use Tax Templates for Tax Calculation option in the Transaction Settings setting. Please refer here for more details about Tax Templates.

To work with VAT Codes, first ensure you are in the Nominal Ledger. Then, if you are using Windows or macOS, click the [Settings] button in the Navigation Centre to open the 'Settings' list and double-click 'VAT Codes' in this list. If you are using iOS or Android, select 'Settings' from the Tools menu (with 'wrench' icon) and tap 'VAT Codes' in the 'Settings' list. In both cases, the 'VAT Codes: Inspect' window illustrated below will open. Fill in the fields as described. Then, to save changes and close the window, click the [Save] button (Windows/macOS) or tap ‚àö (iOS/Android). To close the window without saving changes, click the close box (Windows/macOS) or tap < (iOS/Android).

Each row in the matrix contains a separate VAT Code record. To edit a VAT Code record, simply click or tap in the field to be changed and overtype the existing entry. If you are using Windows or macOS, you can add a new VAT Code record by clicking in the Code field in the first blank line and entering appropriate text. To remove a VAT Code, click on the row number on the left of the row and press the Backspace key. To insert a new row, click on the row number and press the Return key. If you are using iOS or Android, you can add rows by tapping the + button below the matrix. To remove a row, long tap on the row number on the left of the row and select 'Delete Row' from the resulting menu. To insert a row, long tap on the row number where the insertion is to be made and select 'Insert Row' from the resulting menu.

The VAT Codes setting is spread over six flips. To view specific flips, click (Windows/macOS) or tap (iOS/Android) one of the six flip tabs (marked A-F) on the right of (Windows/macOS) or under (iOS/Android) the matrix:

Please follow the links below for details about each part of the setting:
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Settings in the Nominal Ledger:

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