icon, enter Assisted Setup. Consumers and businesses pay value-added tax (VAT) when they purchase goods or services. The amount of VAT to pay can vary, depending on several factors. In Business Central , you set up VAT to specify the rates to use to calculate tax amounts based on the following:
You can set up VAT calculations manually, but that can be tricky and time consuming. To make it easy, we provide an assisted setup guide named VAT Setup that will help you with the steps. We recommend that you use the assisted setup guide to set up VAT.
You can use the guide only if you have created a My Company, and have not posted transactions that include VAT. Otherwise, it would be very easy to use different VAT rates by mistake, and make VAT-related reports inaccurate.
If you want to set up VAT calculations yourself, or just want to learn about each step, this topic contains descriptions of each step.
We recommend that you use the VAT Setup assisted setup guide to set up VAT in Business Central .
To start the assisted setup guide, follow these steps:
icon, enter Assisted Setup. To help ensure that people enter valid VAT registration numbers, you can define formats for the VAT registration numbers that are used in the countries or regions in which you do business. Business Central will display an error message when someone makes a mistake or uses a format that is incorrect for the country or region.
To setup VAT registration numbers, follow these steps:
icon, enter Countries/Regions.? Allows any character.
You can use other characters as long as they are always present in the country or region format. For example, if you need to include a period or a hyphen between sets of numbers, you can define the format as ##.####.### or @@-###-###.
VAT business posting groups should represent the markets in which you do business with customers and vendors, and define how to calculate and post VAT in each market. Examples of VAT business posting groups are Domestic and European Union (EU).
Use codes that are easy to remember and describe the business posting group, such as EU, Non-EU, or Domestic. The code must be unique. You can set up as many codes as you need, but you cannot have the same code more than once in a table.
To set up a VAT business posting group, follow these steps:
icon, enter VAT Business Posting Group, and then choose the related link. You set up default VAT business posting groups by linking them to general business posting groups. Business Central automatically assigns the VAT business posting group when you assign the business posting group to a customer, vendor, or general ledger account.
VAT product posting groups represent the items and resources you buy or sell, and determine how to calculate and post VAT according to the type of item or resource that is being bought or sold.
It is a good idea to use codes that are easy to remember and describe the rate, such as NO-VAT or Zero, VAT10 or Reduced for 10% VAT, and VAT25 or Standard for 25%.
To set up a VAT business posting group, follow these steps:
icon, enter VAT Product Posting Groups, and then choose the related link. Business Central calculates VAT amounts on sales and purchases based on VAT posting setups, which are combinations of VAT business and product posting groups. For each combination, you can specify the VAT percent, VAT calculation type, and general ledger accounts for posting VAT for sales, purchases, and reverse charges. You can also specify whether to recalculate VAT when a payment discount is applied or received.
Set up as many combinations as you need. If you want to group VAT posting setup combinations with similar attributes, you can define a VAT Identifier for each group, and assign the identifier to the group members.
To combine VAT posting setups, follow these steps:
icon, enter VAT Posting Setup, and then choose the related link.If you want to apply the same VAT posting groups to multiple entities, you can set up Business Central to do so by default. There are a couple of ways to do this:
The VAT business or product posting group is assigned when you choose a business or product posting group for a customer, vendor, item, or resource.
The following sections describe how to assign VAT posting groups to individual entities.
icon, enter Chart of Accounts, and then choose the related link. icon, enter Customer or Vendor, and then choose the related link. icon, enter Item or Resource, and then choose the related link. Tax authorities can, and do, change their requirements for posting VAT. VAT statement templates and VAT statement names can help you prepare for upcoming changes and make a smooth transition to the new requirements. You can use VAT statement templates to define the fields to include in your VAT statement, which in turn define the calculations, and you can create a new VAT statement template when requirements change. For example, one template might calculate VAT for this year based on the current requirements, and another might calculate VAT based on requirements for next year. Templates are also a way to keep a history of VAT statement formats, for example, so that you can look back to see how you calculated VAT in previous years.
VAT statements let you calculate your VAT settlement amount for a certain period, for example, a quarter. After you define a VAT statement, you can preview it to make sure it meets your needs.
To define a VAT statement, follow these steps:
icon, enter VAT Statements, and then choose the related link. You can filter the information that the statement will include, depending on what you choose in the Type field. Account Totaling is useful when you want the VAT from a specific account. VAT Entry Totaling gets VAT from the accounts assigned to the selections in the Gen. Posting Type, VAT Bus. Posting Group, and/or the VAT Prod. Posting Group fields. Row Totaling lets you enter a value or quick filter criteria in the Row Totaling field. For more information, see Searching, filtering, and Sorting Data. Description is often used to add a note to the statement. For example, you could use it as a heading when you've used row totaling.
To preview the VAT statement, follow these steps:
You set up a VAT clause to describe information about the type of VAT that is being applied. The information may be required by government regulation. After you set up a VAT clause, and associate it with a VAT posting setup, the VAT clause is displayed on printed sales documents that use the VAT posting setup group.
If needed, you can also specify how to translate VAT clauses to other languages. Then, when you create and print a sales document that contains a VAT identifier, the document will include the translated VAT clause. The language code specified on the Customer card determines the language.
You can modify or delete a VAT clause, and your modifications will be reflected in a generated report. However, Business Central does not keep a history of the change. On the report, the VAT clause descriptions are printed and displayed for all lines in the report alongside the VAT amount and the VAT base amount. If a VAT clause has not been defined for any lines on the sales document, then the whole section is omitted when the report is printed.
icon, enter VAT Clauses, and then choose the related link. icon, enter VAT Posting Setup, and then choose the related link. icon, enter VAT Clauses, and then choose the related link. You use the Import VAT feature when you need to post a document where the entire amount is VAT. You will use this if you receive an invoice from the tax authorities for VAT for imported goods.
To set up codes for import VAT, follow these steps:
icon, enter VAT Product Posting Groups, and then choose the related link. icon, enter VAT Posting Setup, and then choose the related link. It is important that the VAT registration numbers you have for customers, vendors, and contacts are valid. For example, companies sometimes change their tax liability status, and in some countries tax authorities might ask you to provide reports, such as the EC Sales List report, that list the VAT registration numbers you use when you do business.
The European Commission provides the VIES VAT Number Validation service on its website, which is public and free. Business Central can save you a step and let you use the VIES service to validate and track VAT numbers for customers, vendors, and contacts straight from the customer, vendor, and contact cards. The service in Business Central is named EU VAT Reg. No. Validation Service. The service is available on the Service Connections page, and you can start using it right away. The service connection is free, and signup is not required.
To enable the EU VAT Reg. No. Validation Service, you must have administrator permissions.
When you use our service connection, we record a history of VAT numbers and verifications for each customer, vendor, or contact, in the VAT Registration Log, so you can easily track them. The log is specific to each customer. For example, the log is useful for proving that you have verified that the current VAT number is correct. When you verify a VAT number, the Request Identifier column in the log will reflect that you have taken action.
You can view the VAT Registration log on the Customer, Vendor, or Contact cards, on the Invoicing FastTab, by choosing the lookup button in the VAT Registration No. field.
Our service can also save you time when you create a customer or vendor. If you know the customer's VAT number, you can enter it in the VAT Registration No. field on the Customer or Vendor cards, and we will fill out the customer name for you. Some countries also provide company addresses in a structured format. In those countries, we fill in the address too.
There are a couple of things to note about the VIES VAT Number Validation service:
Some companies must use reverse charge VAT when trading with other companies. For example this rule applies to purchases from EU countries/regions and sales to EU countries/regions.
This rule applies when trading with companies that are registered as VAT liable in another EU country/region. If you do business directly with consumers in other EU countries/regions, then you should contact your tax authority for applicable VAT rules.
You can verify that a company is registered as VAT liable in another EU country by using the EU VAT Registration Number Validation service. The service is available for free in Business Central . For more information, see the section titled Verify VAT registration numbers in this topic.
VAT is not calculated on sales to VAT-liable companies in other EU countries/regions. You must report the value of these sales to EU countries/regions separately on your VAT statement.
To correctly calculate VAT on sales to EU countries/regions, you should:
When you post a sale to a customer in another EU country/region, the VAT amount is calculated, and a VAT entry is created by using the information about the reverse charge VAT and the VAT base, which is the amount that is used to calculate the VAT amount. No entries are posted to the VAT accounts in the general ledger.
Amounts in documents that are not yet posted are rounded and displayed to correspond with the final rounding of amounts that are actually posted. VAT is calculated for a complete document, which means that VAT is calculated based on the sum of all lines with the same VAT identifier in the document.
The VAT rate change tool performs VAT rate conversions for master data, journals, and orders in different ways. The selected master data and journals will be updated by the new general product posting group or VAT product post group. If an order has been fully or partially shipped, the shipped items will keep the current general product posting group or VAT product posting group. A new order line will be created for the unshipped items and updated to align current and new VAT or general product posting groups. In addition, item charge assignments, reservations, and item tracking information will be updated accordingly.
There are, however, a few things that the tool does not convert:
Before you set up the VAT rate change tool, you must make the following preparations.
icon, enter VAT Rate Change Setup, and then choose the related link. icon, enter VAT Rate Change Setup, and then choose the related link. You use the VAT rate change tool to manage changes in the standard rate of VAT. You perform VAT and general posting group conversions to change VAT rates and maintain accurate VAT reporting. Depending on your setup, the following changes are made:
Before you perform VAT rate change conversion, you can test the conversion. To do so, follow the steps below, but make sure to clear the Perform Conversion and VAT Rate Change Tool Completed check boxes. During test conversion, the Converted field in the VAT Rate Change Log Entry table is cleared and the Converted Date field in the VAT Rate Change Log Entry table is blank. After the conversion is complete, choose VAT Rate Change Log Entries to view the results of the test conversion. Verify each entry before you perform the conversion. In particular, verify transactions that use an old VAT rate.
icon, enter VAT Rate Change, and then choose the VAT Rate Change Setup link. Choose the Perform Conversion check box.
Clear the VAT Rate Change Tool Completed check box. The check box is automatically selected when the VAT rate change conversion is completed.
Choose the Convert action.
After the conversion, the Converted field in the VAT Rate Change Log Entry table is chosen and the Converted Date field in the VAT Rate Change Log Entry table displays the conversion date.
Setting Up Unrealized Value Added Tax
How To: Report VAT to a Tax Authority
Work with VAT on Sales and Purchases
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