HOW TO IMPLEMENT VALUE ADDED TAX (VAT) IN MICROSOFT DYNAMICS 365?
HOW TO IMPLEMENT VALUE ADDED TAX (VAT) IN MICROSOFT DYNAMICS 365?
Value Added Tax or VAT is a tax on the consumption or use of goods and services levied at each point of sale. VAT is a form of indirect tax
Dynamics 365 supports many types of indirect taxes, such as sales tax, value-added tax (VAT), goods and services tax (GST), unit-based fees, and withholding tax.
you can check overview here
This post discusses setup and transaction
A- Setup
The following diagram shows the entities of the tax setup and how they are related
1-Create Vendor tax authority who collect the VAT
go to accounts payable /vendors/all vendors
and create a new vendor account
complete the information like address and contact information, vendor group,,..etc
2- create sales tax authority
go to TAX / Indirect taxes /Sales tax / Sales tax authorities.
create new tax authority
define authority, name and complete the other information like contact information and addresses
also, select the report layout and setup rounding if you need.
Map the vendor account to the tax authority that we created
3- Create the sales tax settlement period
go to TAX / Indirect taxes /Sales tax / Sales tax settlment periods.
create new sales tax settlement period, assign the settlement period and description
Select the authority that we created and select the period interval units (days /months/year)
don't forget to define period intervals
complete setup based on your business requirements like the term of payments
4-Create the ledger posting groups
TAX / setup /Sales tax / ledger posting groups.
click new to assign ledger posting group and description
define your main accounts for ledger posting groups that will be attached to each sales tax code
5-Create the sales tax code
go to TAX / Indirect taxes /Sales tax / Sales tax codes.
click new to assign sales tax code and name
select the settlement period, ledger posting group , currency...etc
Click sales tax Code tab to set values for this Code
click Values
click new and assign the value for this code
you can setup value from date to date with minimum and maximum limit
you can check more details about sales tax codes form here
6-Create the sales tax group
go to TAX / Indirect taxes /Sales tax / Sales tax groups.
create new sales tax group and assign a description
add the sales tax codes for sales tax group
you can click use tax check box to indicate that your legal entity, not the vendor, is responsible for calculating and paying use tax on the purchase.
for more details about sales tax groups form, click here
7-Create the item sales tax groups
go to TAX / Indirect taxes /Sales tax / Sales tax groups.
and click new to create the item sales tax group and assign the description
click to select the item sales tax codes
7-assign default tax groups for master data (vendors / customers /items)
for vendors
go to accounts payable /vendors/all vendors
select the sales tax group under invoice and delivery tab
for customers
go to accounts receivable /customers /all customers
select the sales tax group under invoice and delivery tab
for items
go to product information management /products /released products
assign item sales tax group in purchase tab
and assign item sales tax group in purchase tab
setup completed, you can make some transactions to check this setup
B- Transaction
I will show examples of transaction like
1- purchase order
go to accounts payable /purchase order /all purchase order
and create a new purchase order and complete the required data and check totals
2- Sales order
go to accounts receivables /sales order /all sales order
and create a new sales order and complete the required data and check totals
3- invoice journal
go to accounts payable /invoices /invoice journal
4- free text invoice
go to accounts receivables /invoices /all free text invoices
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