The SEVEN steps of Configuring Value added taxes
The SEVEN steps of Configuring Value added taxes
We will continue from step 2 as we have talked about step one in the introduction blog of D365 tax module.
Step 2 (Create vendor for the tax authority)
this is not a primary step , but the benefit form it that you can monitor the due date of payment to the tax authority via payable module , so you will not miss the tax payment date , if you didn’t create a vendor , you have to monitor the payment date manually so as to not got fined by the law.
We will know more about creating vendors in D365 Accounts Payables blogs.
lets move to the next step.
Step 3 (Sales tax authorities)
Here we configure the VAT tax authority account and connect it with the vendor account that we created in the previous step if exist.
In other countries they can assign their designed report layout but if not having your country report layout let it as default , and then specifying the rounding from.
You can create as many Tax Authorities as you can , and if there is an integration agreement between your country Tax authorities and Microsoft Dynamics you can complete the other data like
- Authority identification
- Address fast-tab
- Contact Information fast-tab.
Step 4 (Sales Tax Settlement period)
First you assign the settlement period to the related tax authority, and then specify the period intervals, the period interval duration, and terms of payments according to the tax law.
Create new period interval automatically from new period interval button.
Remember
The related sales tax authority can be set up as a vendor and the sales tax settlement will create an open vendor invoice. The terms of payment define the due date for the open vendor invoice.
The sum of period intervals must cover whole periods so that no tax transactions fall outside the calculation periods &Period intervals cannot overlap.
By default, Finance generates offset tax transactions during the settlement process, which can cause performance issues if there are many tax transactions within a period interval. Enable the Prevent generating offset tax transactions option to prevent generating offset tax transactions.
You can activate the option of using batch processing for sales tax settlement.
“Know more about batch processing in batch process blogs.”
Step 5 (Sales Tax Code)
It’s a Vital step in the setup of taxes and also you can edit or add tax codes according to the law updates.
What in sales tax code?
It includes
1- How tax is calculated , posted and reported .
2-When the payment are made.
3-To Whom the payments are made.
First you create a sales tax code by going to the sales tax code from the path that appear at the top of the above picture.
and then Click new and create a new tax code, set the value of the limit of the tax code from the sales tax code button on the action pane.
On The general Fast-Tab
1-assign the settlement period2-ledger posting group
3-the currency of sales tax.
On the Calculation Fast-Tab
It’s Important to set up your calculation parameters, how the VAT will be calculated while processing the entry?
As shown above in the red rectangle you will know how the VAT will be deducted while processing.
Select from the following options in the Origin list:
The first two methods are the most common we use in Egypt.
Step 6 (Sales tax group & Item Sales tax group)
In the VAT Law you have to set Tax code for parties “Customer and vendor” sorting , for example in Egyptian VAT law for normal applicant tax is 14% , but for contractors it’s 5% and some entities are exempted.
And also the sales tax for items will be the same of the applicants which is 14% , but some items may be scheduled for another percentage or for exemption like milk and cigarettes in the Egyptian VAT law.
Sales tax group
So according to that in D365, Sales tax groups are groups of sales tax codes that are attached to customers and vendors. They are also attached to ledger accounts for transactions that are not posted to a vendor or customer.
A sales tax group includes all sales tax codes that apply when you trade goods or services with customers and vendors.
Here-above for example , we created a sales tax group that include all customer or vendors applying VAT 14%.
And for the below screenshot
We created a sales tax group that include all customers or vendors applying 14% and 5% , and in the entry process the matched code between “sales tax code” and “item sales tax code” will be chosen.
Item sales tax group
In the Item sales tax group , you can add all VAT codes related to all your items or categories in your Business ,
and as we noted the common tax codes between sales tax group and item sales tax group only will be used in any transaction processing.
Step 7(Sales tax reporting code)
In Egypt it’s an optional step that you configure if you need to distinguish between VAT transactions from selling , purchasing or importing as shown in the below screen shoot ( the distinguishing is setup in the sales tax code page , reporting setup fast-tab
The codes that appears here are configured in sales tax reporting code page “ and code sorting will appear in your default report printing.
After Configuring sales tax ,lets go to the next blog of processing and reporting VAT.
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