About Consumption Tax Reporting
With the Consumption Tax, companies are taxed on the supplies they purchase, and taxes are withheld on goods the companies sell. Companies must periodically pay the difference between the CT paid on supplies and the CT charged on goods or services.
The frequency of filing Consumption Tax returns depends on your turnover. The tax return lists all of your company's transactions related to the supply of relevant goods or services. Any tax due must be paid simultaneously with the filing of the tax return. In the case of a tax credit, where the CT incurred by the company exceeds the CT charged on its sales and services in the reporting period, documentary proof related to the transactions is often requested.
Consumption Tax is recognized upon invoicing for both goods and services.
If the Japan Country Pack is licensed and enabled, the amount can be computed on either the invoice header or on the invoice lines. In large companies, where the unit prices tend to be large, they may prefer line-level tax calculations. In smaller companies, where the unit prices tend to be smaller, they may prefer header-level tax calculations. You set this preference on the Customers form.
If the Japan Country Pack is licensed and enabled, the calculated tax amount can be rounded off (for example, 4.4 becomes 4.0 and 4.5 becomes 5.0) or it can be rounded up (for example, 4.4 becomes 5.0). The rounding rule must be agreed upon by the customers and vendors and is also set on the Customers form.
The Consumption Tax has three components:
- Input tax on vendor vouchered amounts
- Output tax on customer invoiced amounts
- Automatic tax entries
You must set up separate A/R and A/P tax accounts to record the amounts for these components.
Example ledger transactions created for sales, purchasing, and the manual journal entries could look as follows:
| Ledger Transaction | Account | Amount |
|---|---|---|
| Manual Entry | 30000 | 1000 |
| Manual Entry | 15000 | 50 |
| Manual Entry | 30000 | 500 |
| Invoice | 40000 | 2000 |
| Invoice | 20200 | 100 |
| Invoice | 40000 | 350 |
| Voucher | 50000 | 500 |
| Voucher | 50100 | 50 |
| Voucher | 50000 | 2500 |
The tax records in the various tables that correspond to these ledger records would be:
| Table | Tax Account | Tax | Tax Basis | Tax Code | Tax Rate |
|---|---|---|---|---|---|
| Japan Journal Tax Table | 15000 | 50 | 1000 | OH | 5 |
| Japan Journal Tax Table | 15000 | 0 | 500 | NT | 0 |
| Invoice Sales Tax Table | 20200 | 100 | 2000 | OH | 5 |
| Invoice Sales Tax Table | 20200 | 0 | 350 | NT | 0 |
| Voucher Sales Tax Table | 50100 | 50 | 500 | US | 10 |
| Voucher Sales Tax Table | 50100 | 0 | 2500 | NT | 0 |
For the Consumption Tax Report, you create records in the Consumption Tax Report Account Setup form for accounts 30000, 40000, and 50000, and give them a description to describe what kind of transactions they represent. The report generated would show:
| Account | Description | Total Amount | Non-Taxable Amount | Taxable Amount | Tax Amount |
|---|---|---|---|---|---|
| 30000 | Travel | 1550 | 500 | 1000 | 50 |
| 40000 | Sales | 2450 | 350 | 2000 | 100 |
| 50000 | Purchases | 3050 | 2500 | 500 | 50 |
If the Japan Country Pack is licensed and enabled, then for these same transactions, the Tax Control Report would show:
| Tax Code: OH | Description: Ohio | Type: Rate | Rate: 5 | |
|---|---|---|---|---|
| Account | Description | Date | Tax Basis> | Tax Amount |
| 15000 | Travel Tax | 11/12/13 | 1000 | 50 |
| 20200 | Sales Tax Payable | 11/5/13 | 2000 | 100 |
| Tax Code: US | Description:United States | Type: Rate | Rate: 10 | |
|---|---|---|---|---|
| Account | Description | Date | Tax Basis | Tax Amount |
| 50100 | Sales Tax Expense | 11/13/13 | 2000 | 100 |
| Tax Code: NT | Description:Non-Taxable | Type: Exempt | Rate: 0 | |
|---|---|---|---|---|
| Account | Description | Date | Tax Basis | Tax Amount |
| 15000 | Travel Tax | 11/12/13 | 500 | 0 |
| 20200 | Sales Tax Payable | 11/1/13 | 350 | 0 |
| 50100 | Sales Tax Expense | 11/4/13 | 2500 | 0 |