Calculating Tax Automatically

The Financials automatic tax calculation facility can identify the tax portion of a transaction and generate the appropriate postings to the accounts identified in Tax Details (TXD). In addition, the tax amount can be apportioned over two tax accounts and the appropriate postings for withholding tax can be identified and generated.

Conditions for Automatic Tax Calculation

Before any automatic tax calculations are performed on a transaction line, the following conditions must exist:

The tax analysis dimension must be identified on Ledger Setup (LES) in the Tax Dimension field
The tax analysis dimension should be identified as a mandatory analysis code on the appropriate journal types using Journal Types (JNT)
The Enable Automatic Tax option must have been set on Journal Types (JNT) for the journal type
The analysis code for the tax analysis dimension must be entered on the journal line
The analysis code entered must correspond to a tax details record that has input/output tax accounts as defined on Tax Details (TXD).

Note: The automatic tax calculations are only performed when you are creating journals using Ledger Entry (LEN) or Ledger Import (LIM). If you amend a transaction line which triggered the creation of tax journal lines, the tax lines must be amended manually. That is they are not recalculated automatically. Additionally, if you delete a journal line, you must manually delete the tax journal lines created from it.

Transactions generated in this way acquire the same journal line number, with a suffix, as the 'base' transaction, i.e. the transaction line which triggered the tax calculations. Preset lines defined in Journal Presets (JNP) are therefore not affected by the addition of new lines to the journal.