Value Added Tax

Value Added Tax (VAT) is a tax on consumer expenditure. VAT is collected on business transactions, imports, and acquisitions by companies residing in, for example, the United Kingdom and Mexico. There are three levels of VAT: the standard rate, the reduced rate, and the zero rate. A product that is zero-rated for VAT does not incur a VAT charge, but is treated as a taxable product in all other respects. Some products are exempt from VAT, which means they are non-taxable and can only be made taxable by government legislation.

VAT Returns are submitted to the government taxing entity either monthly or quarterly. The VAT Return records how much VAT on sales you must pay to the government, and how much VAT you have paid on business-related purchases, which you can claim back.

If your company resides in a country that requires you to collect or pay VAT on products or services, you must set up your company, customer, and vendor records correctly. This includes setups for Intrastat reporting and establishing pre-tax settlement discounts.

Taxing logic is applied only to the costing of an invoice, a miscellaneous credit, a credit memo, a debit memo, a manual payment, and a reversal. Taxing is not applied to the costing of a service charge, a rebate, unapplied cash, or a COD.