@lubos, I am curious about this. Reverse charged VAT normally applies only on purchases, preventing the tax authority from having to collect tax from an entity outside their jurisdiction. Why would it be needed on sales invoices?
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Tax laws are getting more complex. Iâm sure it needed in some tax jurisdictions
Itâs just simpler if reverse charged tax codes behave the same way without the consideration for transaction type.
I think it is harmless considering you wouldnât use reverse charged tax codes on sales invoices in the first place.
Hi @Tut, in the EU the reverse charge mechanism works both ways. VAT law and regulations are to a large degree unified within the EU. The rates differ however. All so-called âintra-community tradeâ (basically B2B transaction between taxable persons from two EU member states) need to be taxed in the country where the customer is based, not, as normally would be the case, where the supplier is based. In this situation both supplier and customer need to treat the transaction as reverse charged.
@lubos, as I suggested earlier, would it be possible to tweak the Tax Summary report to group RC transactions and non-RC transactions separately? And another grouping could be helpful too: for some reason the EU requires reporting of goods and ârelated servicesâ separate from services. I use separate Tax Codes for this purpose. But it would be handy to have a grouping option on the Tax Summary report.
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This is incorrect. There is absolutely nothing wrong in having your financial / management reporting on an accrual basis and your taxation reporting on a cash basis. That is why tax authorities allow the option.
Well said, something which few accountants actually understand - but the âlaymanâ does.
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Not all tax authorities do, especially when inventory is involved.
Technically tax authorities donât allow anything. They are only following the law of their land (supposedlyâŚ). They donât usually make those laws. But indeed, laws differ hugely from one country to another. Thatâs why I am utterly in awe about Manager being so versatile that it can accommodate for many, if not all jurisdictions.
Firstly, the very generic statement âThat is why tax authorities allow the optionâ was never intended to âcatch allâ tax authorities per se (as your response implies), as many tax authorities, such as the USA, donât have GST / VAT taxes and therefore they were a natural exclusion from being embraced by both the topic and the statement, however, thanks for your nit picking of the post, the first for the year.
Secondly, your comment âespecially when inventory is involvedâ is factually incorrect. Inventory and the GST / VAT tax reporting basis arenât necessarily linked. For example User Dalacor has both inventory and cash basis VAT reporting. They are in the UK.
No, my statement was not incorrect. And I never mentioned such a linkage. My only statement was that not all tax authorities allow financial accounting on an accrual basis and tax reporting on a cash basis. Your example of the USA is proof, where inventory generally excludes the use of cash basis accounting for tax reporting.