Expose Income Statement accounts for Tax Codes

In Ghana, the Same VAT code has different accounts involved when used as purchases or sales.
Get fund and NHIL levies which are to be charged alongside VAT are not subject to input tax deduction. These levies are to be collected and paid to the tax authority when used on sales invoices.

Annotation 2020-09-02 134356

(VAT 12.5 is calculated on the Taxable value + Get fund + NHIL making the effective tax rate 18.125%)

This technically means that we have to use two tax codes always. Some industries have specific levies they levy along with VAT (e.g 1% tourism levy) on their sales invoices. A separate document can be issued for this levy but since only one tax code can be selected for transactions in many applications, they are usually added to the VAT tax code.

If we could select expenses for these tax code lines it would simplify things a lot. I know asset accounts can be selected and a journal entry made to correct things but it wouldn’t be neat bookkeeping.

@lubos I suggest you allow users to access income statement accounts in the tax codes set up to help people in places where some of the Tax codes with multiple tax rates are not like the regular deductible tax rates.
Visit the tax authority’s page (Ghana Revenue Authority/GRA)
Go to

How are GET and NHIL accounted for and documented after you pay them to the supplier? If the fact that the supplier’s sales invoice listed them and you paid the resulting purchase invoice is sufficient, then allocating the levies to an expense account makes sense. But if you have to await confirmation that the supplier has remitted the levy on your behalf, you need to hold the value of the levies in an asset account until you get that confirmation. Only then could it be journaled over to an expense account.

Your work ends there. You do not have to find out if the supplier remitted the levy to the the tax authority or not. It must be captured into a Tax expense account immediately.

Tax expenses (non-deductible levies) on purchases can be capitalised to the cost of the procured item (it a must for inventory items) or services with another line item and because of this I reason having a VAT tax code for purchases of 12.5% is what I will settle for (this is what I have been recommending to users anyway).

This works well for capitalising the levies (tax expenses) to procured services and products and there wouldn’t be a need to expose profit or loss accounts in the Tax code setup. But the levies must be entered manually.