VAT on Sales and Purchases
Calculating and displaying VAT amounts on sales and purchase documents
When you choose an item number in the No. field on a sales or purchase document, Business Central fills in the Unit Price and Line Amount fields. The unit price comes from either the Item card or the Item prices allowed for the item and customer. Business Central calculates the line amount when you enter a quantity for the line.
If you want the unit prices and line amounts to include VAT, for example if you are selling to retail consumers, choose the Prices Including VAT checkbox on the document. For more information, see Including or Excluding VAT in Prices and Line Amounts.
You can calculate and display VAT amounts in sales and purchase documents differently depending on the type of customer or vendor you're dealing with. You can also change the calculated VAT amount manually, for example so that it matches the VAT amount calculated by your vendor on a given transaction.
Including or excluding VAT in prices and line amounts
If you choose the Prices Including VAT checkbox on a sales document, the Unit Price and Line Amount fields will include VAT. By default, the values in these fields do not include VAT. The names of the fields reflect whether prices include VAT.
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. Typically, prices on the Item Card will exclude VAT.
Correcting VAT amounts manually on sales and purchase documents
You can make corrections to posted VAT entries so that you can change the total sales or purchase VAT amounts without changing the VAT base. For example, if you receive an invoice from a vendor with an incorrect VAT amount.
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.
If a payment discount has been calculated based on 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.
Setting up the system for manual VAT entry in sales documents
The following describes how to enable manual VAT changes on sales documents. The steps are similar on the Purchases & Payables Setup page.
On the General Ledger Setup page, specify a Max. VAT Difference Allowed between the amount calculated by application and the manual amount. On the Sales & Receivables Setup page, enable the Allow Vat Difference field.
Adjusting VAT for a sales document
Open the relevant sales order. Choose the Statistics action. On the Invoicing FastTab, choose the value in the No. of Tax Lines field. Edit the VAT Amount field.
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, application 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 within the acceptable parameters. Click 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 Business Central calculated and the VAT amount on the vendor's invoice.
Setting up the system for manual VAT entry in general journals
You must perform the following steps before you manually enter VAT in a general journal.
- On the General Ledger Setup page, specify a Max. VAT Difference Allowed between the amount calculated by application and the manual amount.
- On the General Journal Templates page, enable the Allow VAT Difference checkbox for the relevant journal.
Setting up the system for manual VAT entry in sales and purchase journals
You must perform the following steps before you manually enter VAT in a sales or purchase journal.
- On the Purchases & Payables Setup page, enable the Allow VAT Difference checkbox.
- Repeat step 1 for the Sales & Receivables Setup page.
- 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. Business Central will check that the difference is not greater than the specified maximum.