VAT is normally paid to vendor. For example, we buy a product for 100. If the VAT is 10%, then we have to pay 110 to the vendor. This will record the following journal:
D. Inventory 100
D. VAT 10
C. Accounts payable 110
We configure the following taxes:
VAT 10% excluded --> is used if the price does not include tax
- Tax computation = Percentage of price
- Amount = 10%
- Included in price = No
- Affect base of subsequent taxes = No
- Distribution for invoices/credit notes:
-- 100% of tax, account = VAT purchase
VAT 10% included --> is used if the price includes tax
- Tax computation = Percentage of price
- Amount = 10%
- Included in price = Yes
- Affect base of subsequent taxes = Yes
- Distribution for invoices/credit notes:
-- 100% of tax, account = VAT purchase
Both are successful. Tested with "price = 100, VAT 10% excluded" or "price = 110, VAT 10% included" yields the same result.
Now we talk about withholding taxes. In this scenario, VAT is not paid to the vendor, but is collected and deposited into the state treasury by us. Previous journal changed to:
D. Inventory 100
D. VAT 10
C. Accounts payable 100 --> we only pay 100 to vendor
C. VAT Payable 10 --> we collect VAT and deposit it later
We configure the following taxes:
VAT 10% excluded WITHHOLDING TAX --> is used if the price does not include tax
- Tax computation = Percentage of price
- Amount = 10%
- Included in price = No
- Affect base of subsequent taxes = No
- Distribution for invoices/credit notes:
-- 100% of tax, account = VAT purchase
-- minus 100% of tax, account = VAT payable
VAT 10% included WITHHOLDING TAX --> is used if the price includes tax
- Tax computation = Percentage of price
- Amount = 10%
- Included in price = Yes
- Affect base of subsequent taxes = Yes
- Distribution for invoices/credit notes:
-- 100% of tax, account = VAT purchase
-- minus 100% of tax, account = VAT payable
The former is successful. Using price = 100, yields the following journal:
D. Inventory 100
D. VAT 10
C. Accounts payable 100
C. VAT Payable 10
But the latter is failed. Using price = 110, yields the following journal:
D. Inventory 110
D. VAT 11
K. Accounts payable 110
K. VAT Payable 11
Do I miss some configuration? Any help will be appreciated. Thanks in advance.
