VAT cash basis

When a vendor has an agreement with a customer to collect money, and the vendor sends a payment request to the bank to collect it, the request is made to the customer’s bank. Typically, the communication between the vendor and bank is electronic.

A manual or electronic remittance advice is sent by a vendor to the customer to indicate which invoices are being paid. Typically, the remittance advice includes invoice numbers and invoice amounts.

Mexico specifics

With cash basis VAT accounting, a business accounts for and pays VAT on the basis of cash received and paid rather than on an accruals basis. For example, when invoices are issued and received. Mexican VAT is paid on a cash flow basis because the VAT is based on the payment date.

VAT is initially posted to a VAT suspense account when the invoice is created/recorded. When payment is made, a contra transaction is created and posted to the VAT payable/receivable account with the payment date as the VAT date.

To regulate the time when the actual payment is made, the date on which the payment is received and is cleared by the bank must be verified. This is the date that the payment is received and the VAT is due.

How Infor meets the requirement

Before you can use this feature, ensure that these setup tasks are completed:

  • In the Entity Tax Code record, in the Tax Point field, select the Payment Date. See the Financials Setup and Administration Guide.
  • In Payables, select the Tax Input Account and the Input Due date. See the Payables User Guide.
  • In Receivables, select the Tax Output Account and the Output Due date. See the Receivables User Guide.

When an invoice is processed, the VAT is recorded in a VAT suspense account. When the invoice is paid, the VAT suspense account is reversed and the VAT is recorded in the VAT account.

See Setting up for VAT cash basis.