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This text refers to program version 8.1  

VAT Codes in Purchase Transactions

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

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Whenever you purchase an Item, a VAT Code will determine the rate at which VAT will be charged on the Item and the Input VAT Account that will be debited with the VAT value.

Purchase Orders and Goods Receipts

Each time you purchase an Item (i.e. whenever you specify an Item in a row in a Purchase Order or a Goods Receipt), a VAT Code for that purchase will be brought in to the V-Cd field (on flip A of the Purchase Order row and flip C of the Goods Receipt row). That VAT Code will be chosen as follows:
  1. The Purch. VAT Code specified in the Contact record for the Supplier will be used. Usually, you would only specify a Purch. VAT Code for an individual Supplier if for some reason your usual VAT accounting method does not apply to them.

  2. The VAT Code specified in the Item record will be used.

  3. The VAT Code specified in the Item Group to which the Item belongs will be used.

  4. The VAT Code specified on the 'VAT' card in the Account Usage P/L setting will be used.
In the last three cases, the choice of VAT Code will depend on the VAT Zone of the Supplier, which you should specify on the 'Company' card of the Contact record for the Supplier.

You will be able to change the choice of VAT Code in a particular Purchase Order or Goods Receipt row if necessary.

In Kenya and other East African countries, if a manufacturing company receives a Sales Order from an export Customer, then any components purchased for manufacturing the Items on the Sales Order will be exempt from tax and customs duties. These are known as TREO (Tax Remission Export Office) Orders. To this end, if you enter "TREO" in the TREO field on flip D of a Purchase Order row or flip E of a Goods Receipt row, the VAT Code in that row will be changed to the TREO VAT Code specified in the Account Usage P/L setting in the Purchase Ledger. Usually this will be a zero-rated VAT Code.

Purchase Invoices

If you create a Purchase Invoice from a Purchase Order or Goods Receipt, the VAT Codes 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 VAT Code in each row will not depend on the Item but on the Cost Account, as follows:
  1. The Purch. VAT Code specified in the Contact record for the Supplier will be used. Usually, you would only specify a Purch. VAT Code for an individual Supplier if for some reason your usual VAT accounting method does not apply to them.

  2. The VAT Code specified in the Account record will be used.

  3. The VAT Code specified on the 'VAT' card in the Account Usage P/L setting will be used.
In the last case, the choice of VAT Code will depend on the VAT Zone of the Supplier.

Again, you will be able to change the choice of VAT Code in a particular Invoice row if necessary.

If you would like the VAT in Credit Notes to be posted to different Input VAT Accounts, you can specify those Input VAT Accounts on flip D in the VAT Codes setting.

Please refer here for more details about VAT Codes.

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