How to work With VAT on Sales and Purchases

If your country or region requires you to calculate value-added tax (VAT) on sales and purchase transactions so that you can report the amounts to a tax authority, you can set up Dynamics NAV to calculate VAT automatically on sales and purchase documents. For more information, see Setting Up to Calculations and Posting Methods for Value-Added Tax.

There are, however, some VAT-related tasks that you can do manually. For example, you might need to correct a posted amount if you discover that a vendor uses a different rounding method.

Calculating and Displaying VAT Amounts in Sales and Purchase Documents

You can calculate and display VAT amounts in sales and purchase documents differently, depending on the type of customer or vendor that you are dealing with. You can also override the calculated VAT amount to match the VAT amount calculated by your vendor on a given transaction.

Unit Price and Line Amount Including/Excluding VAT on sales documents

When you choose an item number in the No. field on a sales document, Dynamics NAV fills in the Unit Price field. The unit price comes from either the Item card or the item prices allowed for the item and customer. Dynamics NAVcalculates the Line Amount when you enter a quantity for the line.

If you are selling to retail consumers, you may want prices on sales documents to include VAT. To do this, choose the Prices Including VAT check box on the document.

Including or excluding VAT on prices

If the Prices Including VAT check box is chosen on a sales document, the Unit Price and Line Amount fields include VAT, and the field names will also reflect this. By default, VAT is not included in these fields.

If the field is not selected, the program will fill in the Unit Price and Line Amount field excluding VAT and the field names will reflect this.

You can set up the default setting of the Prices Including VAT for all sales documents for a customer in the Prices Including VAT field on the Customer card. You can also set up item prices to include or exclude VAT. Normally, item prices contained in the Item Card will be the price excluding VAT. The program uses the information from the Price Includes VAT field on the Item card to determine the unit price amount for sales documents.

The following table provides an overview of how the program calculates the unit price amounts for a sales document when you have not set up prices in the Sales Prices window:

Correcting VAT Amounts Manually in Sales and Purchase Documents

You can make corrections to posted VAT entries. This allows you to change the total sales or purchase VAT amounts without changing the VAT base. You may need to do this, for example, if you receive an invoice from a vendor that has calculated VAT incorrectly.

Although you may have set up one or more combinations to handle import VAT, you must set up at least one VAT product posting group. For example, you can name it CORRECT for correction purposes, unless you can use the same general ledger account in the Purchase VAT Account field on the VAT posting setup line. For more information, see Setting Up to Calculations and Posting Methods for Value-Added Tax.

If a payment discount has been calculated on the basis of an invoice amount that includes VAT, you revert the payment discount part of the VAT amount when the payment discount is granted. Note that you must activate the Adjust for Payments Disc. field in both the general ledger setup in general and the VAT posting setup for specific combinations of a VAT business posting group and a VAT product posting group.

To manually enter VAT in sales documents

1. On the General Ledger Setup page, specify a Max. VAT Difference Allowed between the amount calculated by the program and the manual amount.
2. On the Sales & Receivables Setup page, place a check mark in the Allow Vat Difference field.

To adjust VAT for a sales document

1. Open the relevant sales order.
2. Choose the Statistics action.

3. Choose the Invoicing FastTab.

   NOTE

   The total VAT amount for the invoice, grouped by VAT identifier, is displayed in the lines. You can manually adjust the amount in the VAT Amount field on the lines for each VAT identifier. When you modify the VAT Amount field, the program checks to ensure that you have not changed the VAT by more than the amount you have specified as the maximum difference allowed. If the amount is outside the range of the Max. VAT Difference Allowed, a warning will be displayed stating the maximum allowed difference. You will be unable to proceed until the amount is adjusted to within the acceptable parameters. Choose OK and enter another VAT Amount that is within the allowed range. If the VAT difference is equal to or lower than the maximum allowed, the VAT will be divided proportionally among the document lines that have the same VAT identifier.

Calculating VAT Manually Using Journals

You can also adjust VAT amounts in general, sales, and purchase journals. For example, you might need to do this when you enter a vendor invoice in your journal and there is a difference between the VAT amount that Dynamics NAV calculated and the VAT amount on the vendor's invoice.

Before you manually enter VAT on a general journal

1. On the General Ledger Setup page, specify a Max. VAT Difference Allowed between the amount calculated by the program and the manual amount.
2. On the General Journal Templates page, choose the Allow VAT Difference check box for the relevant journal.

Before you manually enter VAT on sales and purchase journals

1. On the Purchases & Payables Setup page, choose the Allow VAT Difference check box.

2. After you complete the setup described above, you can adjust the VAT Amount field on the general journal line, or the Bal. VAT Amount field on the sales or purchase journal line. Dynamics NAV will check that the difference is not greater than the specified maximum.

   NOTE

   If the difference is greater, a warning will be displayed stating the maximum allowed difference. To continue, you must adjust the amount. Choose OK and then enter an amount that is within the allowed range. If the VAT difference is equal to or lower than the maximum allowed, Dynamics NAV will show the difference in the VAT Difference field.

To post import VAT with purchase invoices

Instead of using a general journal to post an import VAT invoice, you can use a purchase invoice.

To set up purchasing for posting import VAT invoices

1. Set up a vendor card for the import authority that sends you the import VAT invoice. The Gen. Bus. Posting Group and VAT Bus. Posting Group must be set up in the same way as the general ledger account for the import VAT.
2. Create a Gen. Product Posting Group for the import VAT and set up an import VAT Def. VAT Product Posting Group for the related Gen. Product Posting Group.
3. Choose the icon, enter Chart of Accounts, and then choose the related link.
4. Select the import VAT general ledger account, and then on the Home tab, in the Manage group, choose Edit.
5. On the Posting FastTab, select the Gen. Prod. Posting Group setup for import VAT. Dynamics NAV automatically fills in the VAT Prod. Posting Group field.
6. Choose the icon, enter General Posting Setup, and then choose the related link.
7. Create a combination of the Gen. Bus. Posting Group for the VAT authority and the Gen. Prod. Posting Group for import VAT. For this new combination, in the Purchase Account field, choose the import VAT general ledger account.

To create a new invoice for the import authority vendor once you have completed the setup

1. Choose the icon, enter Purchase Invoices, and then choose the related link.
2. Create a new purchase invoice.
3. In the Buy-from Vendor No. field, choose the import authority vendor, and then choose the OK button.
4. In the purchase line, in the Type field, choose G/L Account, and in the No. field, choose the import VAT general ledger account.
5. In the Quantity field, type 1.
6. In the Direct Unit Cost Excl. VAT field, specify the VAT amount.
7. Post the invoice.

To process certificates of supply

When you sell goods to a customer in another EU country/region, you must send the customer a certificate of supply that the customer must sign and return to you. The following procedures are for processing certificates of supply for sales shipments, but the same steps apply for service shipments of items, and return shipments to vendors.

To view certificate of supply details

1. Choose the icon, enter Posted Sales Shipments, and then choose the related link.
2. Choose the relevant sales shipment to a customer in another EU country/region.
3. Choose Certificate of Supply Details.

4. By default, if the Certificate of Supply Required check box is selected for VAT Posting Group setup for the customer, the Status field is set to Required. You can update the field to indicate whether the customer has returned the certificate.

   NOTE

   If the VAT Posting Group setup does not have the Certificate of Supply Required check box selected, then a record is created and the Status field is set to Not Applicable. You can update the field to reflect the correct status information. You can manually change the status from Not Applicable to Required, and from Required to Not Applicable as needed.

   When you update the Status field to Required, Received, or Not Received, a certificate is created.

   TIP

   You can use the Certificates of Supply window to get a view of the status of all posted shipments for which a certificate of supply has been created.

5. Choose Print Certificate of Supply.

   NOTE

   You can preview or print the document. When you choose Print Certificate of Supply and print the document, the Printed check box is automatically selected. In addition, if not already specified, the status of the certificate is updated to Required. If needed, you include the printed certificate with the shipment.

To print a certificate of supply

1. Choose the icon, enter Posted Sales Shipments, and then choose the related link.
2. Choose the relevant sales shipment to a customer in another EU country/region.

3. Choose the Print Certificate of Supply action.

   NOTE

   Alternatively, you can print a certificate from the Certificate of Supply page.

4. To include information from the lines on the shipment document in the certificate, select the Print Line Details check box.

5. Choose the Create Certificates of Supply if Not Already Created check box to have Dynamics NAV create certificates for posted shipments that do not have one at the moment of execution. When you choose the check box, new certificates will be created for all posted shipments that do not have certificates within the selected range.
6. By default, the filter settings are for the shipment document that you have selected. Fill in the filter information to select a specific certificate of supply that you want to print.

7. On the Certificate of Supply page, choose the Print action to print the report, or choose the Preview action to view it on the screen.

   NOTE

   The Certificate of Supply Status field and the Printed field are updated for the shipment in the Certificates of Supply page.

8. Send the printed certificate of supply to the customer for signature.

To update the status of a certificate of supply for a shipment

1. Choose the icon, enter Posted Sales Shipments, and then choose the related link.
2. Choose the relevant sales shipment to a customer in another EU country/region.

3. In the Status field, choose the relevant option.

   If the customer has returned the signed certificate of supply, choose Received. The Receipt Date field is updated. By default, the receipt date is set to the current work date.

   You can modify the date to reflect the date that you received the customer's signed certificate of supply. You can also add a link to the signed certificate using standard Dynamics NAV linking.

   If the customer does not return the signed certificate of supply, choose Not Received. You must then send the customer a new invoice that includes VAT, because the original invoice will not be accepted by the tax authority.

To view a group of certificates, you start from the Certificates of Supply window, and then update the information about the status of outstanding certificates as you receive them back from your customers. This can be useful when you want to search for all certificates that have a certain status, for example, Required, for which you want to update their status to Not Received.

To update the status of a group of certificates of supply

1. Choose the icon, enter Certificates of Supply, and choose the related link.
2. Filter the Status field to the value that you want in order to create the list of certificates that you want to manage.
3. To update the status information, choose Edit List.

4. In the Status field, choose the relevant option.

   If the customer has returned the signed certificate of supply, choose Received. The Receipt Date field is updated. By default, the receipt date is set to the current work date.

   You can modify the date to reflect the date that you received the signed the certificate of supply. You can also add a link to the signed certificate using standard Dynamics NAV document linking.

   NOTE

   You cannot create a new certificate of supply in the Certificate of Supply window when you navigate to it using this procedure. To create a certificate for a shipment that was not set up to require one, open the posted sales shipment, and use either of two procedures described above:

   • To manually create a certificate of supply certificate
   • To print a certificate of supply.

See Also

Setting Up to Calculations and Posting Methods for Value-Added Tax
How To: Report VAT to a Tax Authority

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