Overview of tax handling

	Overview of tax handling Tax handling in LN consists of the following processes: Tax registration Tax registration consists of the calculation and posting of the tax amounts for taxable transactions. The tax registration setup defines the way LN calculates and posts tax amounts. The LN tax handling setup is very flexible and detailed so that for most situations and types of transactions, the default tax rates and the calculated tax amounts are correct. For details, refer to Setting up tax registration. Tax declarations Processing a tax declaration consists of preparing and submitting the tax declaration to the tax authorities, and paying the due amounts to the collection office. For each type of tax declaration, you must define a tax declaration master. For details, refer to Composing a tax declaration and Processing tax declarations. Note If you do not want to use the LN tax functionality, you must perform the steps described in Deactivating tax functionality. Tax systems LN distinguishes the following types of tax systems: Sales tax, which is also called Destination Sales Tax or Sales and Use Tax. Value added tax (VAT). Value added tax can be combined with withholding tax. For all types of tax, you can define exceptions and exemptions. For all types of tax, you must define tax codes. For details, refer to Using tax codes. Value added tax Value added tax is an indirect percentage tax to be paid on all goods an services supplied either to the consumer or to other businesses, for example, on final products delivered to a distributor or dealer, and on intermediary products delivered to a manufacturer. The place of supply determines to which authorities the tax must be paid. Organizations that use value added tax must usually apply two sets of tax rates: Domestic tax rates for sales and purchase transactions within the home country. Tax rates for import and export transactions. Withholding income tax and social contributions In many countries, in specific situations, companies are legally required to retain payable income tax and/or social contributions from the payments of purchase invoices, and pay the amount directly to the tax collector’s office. For example, withholding income tax and social contributions can apply to services provided by subcontracting companies, employment agencies, and self employed workers. For details, refer to Withholding tax and social contributions. Related topics Using tax codes Setting up tax registration Deactivating tax functionality Composing a tax declaration Sales tax EU transaction reporting Tax parameters - overview