Accounts Receivable Tax Invoices for South Korea

Accounts Receivable (AR) tax invoices are used to report tax to the South Korea tax authorities (NTS).

This document explains how to:

  • Create an AR tax invoice
  • Adjust the content of an AR tax invoice
  • Upload an AR tax invoice to NTS
  • Manage errors when an error occurs in the upload.

Outcome

  • AR tax invoices are reported to the NTS either by uploading an Excel sheet or by sending an XML file to NTS through the third-party software SmartBill (also referred to as the tax agent).
  • All related customer invoices are labeled with additional information numbers 270 (preliminary tax invoice number) and 271 (tax invoice number).

Before you start

  • Tax agent settings must have been defined in 'Tax Invoice Agent. Open Settings' (TXS095). The program contains fields that identify the company at SmartBill and NTS, and the information needed to connect to SmartBill.
  • Settings must have been made in 'Tax Invoice. Open Settings' (TXS090) to define how the customer invoices should be grouped in a tax invoice.
    • Select if one tax invoice must be created per customer invoice, one per day, one per week, or one per month.
    • Select if all domestic customer invoices or only domestic invoices with VAT must be included.
    • Select if debit and credit customer invoices must be reported on separate tax invoices, or included in the same tax invoice.
    • Optionally, select an invoice class. Separate tax invoices are created for customer invoices with this specific invoice class. One tax invoice is created for each customer invoice in this scenario. Note that as a prerequisite, the parameter 'Invoice class' must be enabled in 'Settings – General Ledger' (CRS750) and the FAM function used when recording customer invoices must be updated with the invoice class.
  • Define exemption for a customer or customer group in 'Tax Invoice. Open Customer Exemptions' (TXS091). In this function, you can define exemptions on all settings listed above. You can also define if reversed reporting is used for a customer, which means that the vendor reports tax on behalf of the issuer of the customer invoice. In this scenario, only preliminary tax invoices are created. It is also possible to define if customer invoices, connected to a customer or customer group, should be exempt from AR tax reporting, so that the customer invoices are not included on any tax invoice.
  • Accounts for VAT payable and sales must be defined in 'Accounting Identity. Open' (CRS630).
  • Customer invoices must have been created.

Limitations for AR tax invoice

  • The field 'Country' in 'Division. Open' (MNS100) must be set to KR-'South Korea'.
  • Separate voucher numbers must be used, which means that one voucher is created for each invoice.
  • Separate tax invoices must be created for customer invoices and customer receipts with cash discount, to record the reduced taxable amount that has been paid. The functionality requires that the FAM function used for payments is defined with:
    • Split payment transaction set to 3-‘Split GL – sev pmt trans in AP/AR’.

    • VAT method cash discount set to 2 or 3.

      2-‘VAT recorded separately’ – the portion of the cash discount amount that is VAT is recorded separately. The transaction receives the accounting dimensions connected to the main VAT code for the invoice.

      3-‘VAT calculated automatically’ – the VAT portion of the cash discount is automatically calculated and recorded separately for each VAT code.

Tax invoicing process workflow

tr_m3_ar_tax_invoices_for_south_korea1

Follow these steps

  1. Initiate AR tax invoicing

    Specify these mandatory fields: base country, invoice date interval, and creation date in 'Tax Invoice. Create' (TXS900). Optionally, you can also specify accounting dates.
    Note: The accounting date must be specified so that cash discounts on customer invoices that have been tax reported in earlier tax reports are included. This is important since the invoice date is the same for both invoices and payments, but the accounting date differs.

    All customer invoices from Accounts Receivable that meet the selection criteria are included and grouped into tax invoices through the settings in (TXS090) and (TXS091). Both paid and unpaid invoices are selected but separate tax invoices are created for paid and unpaid customer invoices. Separate tax invoices are also created for customer invoices and customer receipts with cash discount. The tax invoices are labeled with the creation date and a preliminary tax invoice number. Also, additional information number 270 is updated with the preliminary tax invoice number on the related customer invoices. This prevents the customer invoices from being included in another tax invoice.

  2. Manage AR tax invoice

    The tax invoices are displayed in 'AR Tax Invoice. Open' (TXS905)where the invoices are first displayed as preliminary tax invoices with the status 'New'

    Use related option 11='Invoices' to access 'AR Tax Invoice. Open Invoices' (TXS906), where the customer invoices connected to a tax invoice are displayed. The preliminary tax invoice can be modified by adding or deleting customer invoices in (TXS906). You can also move a customer invoice to a new tax invoice or an existing tax invoice. The amounts on the tax invoice is updated accordingly.

    • Use related option 11='Move to another tax invoice' to move a customer invoice to another tax invoice.
    • Use related option 12='Move to new tax invoice' to move a customer invoice to new tax invoice. A new preliminary tax invoice is created with the next available preliminary tax invoice number.
    • Use function key F14='Import invoice' to add a customer invoice to a tax invoice. Invoices with the same customer number which are not yet included in a tax invoice can be selected.
    • Use related option 'Delete' to delete a customer invoice from a tax invoice.

      You can delete a tax invoice and make changes in (TXS906) until the tax invoice is approved. Select related option 7='Approve' when the preliminary tax invoice has been reviewed. At this point, the tax invoice number is updated. At the same time, additional information number 271 is updated with the tax invoice number on the related customer invoices. You can also approve all preliminary tax invoices with the status 'New' by selecting F17='Approve'.

      These are the components of the tax invoice number:

      1. Creation date, specified in (TXS900)

      2. Value of the field 'Issuing system', specified in (TXS095)

      3. A sequential number created for each creation date

      4. Value of the field 'Business code', specified in (TXS095).

      Note that a tax invoice number is not created on a preliminary tax invoice where reversed reporting is used.

      Select related option 8='Confirm' on the approved tax invoice. You can also confirm all approved tax invoices by selecting F18='Confirm'. The tax invoice is now ready to be uploaded to NTS.

  3. Upload AR tax invoice to NTS

    These are the methods to upload tax invoices to NTS:

    • Log in to the NTS home page and upload the requested information in an Excel file.
    • Send information through an agent. Currently, the agent is SmartBill. There are two alternatives for uploading through a tax agent: by uploading an Excel file or by using an XML file.

    The tax invoice data on (TXS905/B) is used for the method where an Excel file is uploaded. Create a view containing the correct information in 'View. Open' (CRS020) for the program (TXS905). Extract the tax invoice data from (TXS905/B) using the tool 'Export to Excel'.

    The method to upload tax invoice to NTS using an XML file requires that parameters be defined in (TXS095). Select related option 9='Send' on the confirmed tax invoice. You can send all confirmed tax invoices by selecting F19='Send'. The field 'In progress' on (TXS905/B) is enabled to indicate that an invoice is being uploaded. The status is set to 'Sent' and the field 'In progress' is disabled when the upload has been completed without any error.

  4. Manage errors when uploading AR tax invoices to NTS using an XML file

    Errors can occur when uploading tax invoices to NTS using an XML file. The possible causes are an error in the M3 Business Engine, an error in the XML file, or an error when connecting to SmartBill.

    In the first scenario, the upload of a tax invoice failed due to an interruption in the transmission in the M3 Business Engine. The status on the tax invoice is 'Sent' and the field 'In progress' is enabled, but the tax invoice is not uploaded.

    Use correction ID 'TX01' in the 'Program Problem. Solve' (CRS418) to release the tax invoice for another upload. Specify a base country, a creation date and optionally, a customer number and a preliminary tax number. The status is reset to 'Confirmed' on the tax invoices that match the selection criteria. Note that F14='Standard' must be selected the first time correction ID TX01 is used.

    In the second scenario, the upload of the tax invoice has failed and an error message is returned from the tax agent. The status is set to 'Failed' and the field 'In progress' is disabled.

    These are the ways to resolve this:

    1. Review the error message on (TXS095/E) and use related option 9='Send' to upload the invoice again after the error has been corrected in the M3 Business Engine.

    2. Delete the tax invoice. In this scenario, additional information 270 and 271 are deleted on the related customer invoices. The customer invoices are included again on a tax invoice the next time (TXS900) is run.

Manage reversed reporting of AR tax invoices

In this scenario, the buyer reports tax on behalf of the customer. The process is triggered when the parameter for reversed reporting in (TXS091) is set to 2='Yes, tax invoices are not created', resulting in that reversed reporting is used and tax invoices are not created.

The tax invoicing is initiated in (TXS900) as described above and the tax invoices are displayed in 'AR Tax Invoice. Display' (TXS905) as preliminary tax invoices with the status 'New'. In this scenario, the tax invoices are not sent to NTS. Instead, the company receives information about the tax invoices that have been reported to NTS on their behalf.

Use related option 2='Change' to manually specify the tax invoice number on (TXS905/E) once the information is received. At this point, additional information number 271 is updated on the related customer invoice.

Select related option 8='Confirm' to confirm that the tax invoice has been reported. After this, you cannot change the AR tax invoice number anymore.

Manage mass deletion of AR tax invoices

Use F16='Delete' to delete many tax invoices. Select the creation date. Optionally, you can select by status and customer number. The tax invoices are deleted in (TXS905), and additional information 270 and 271 are deleted on the related customer invoices.

Note that additional information number 270 and 271 are not be deleted on customer invoices with status 'Sent' (invoices uploaded to NTS) or 'Confirmed' (invoices with reversed reporting).

Related topics