So, @Taher_Nomani, let me confirm. Are you now saying that, because tax codes cannot be split in reports, it is better to leave only the UAE VAT 5% and 0%, regardless of which UAE state is involved? That would leave you to figure individual state filing amounts externally, relying on your custom field.
Well two solutions I can think of would be:
- We could have different tax codes but each code would be linked to the
customer itself, so for example if I supply to a customer located in Dubai
and set the customer tax code as DXB 5%, it would use DXB 5% on all line
items for all invoices where that customer is selected. Similarly we could
have ADH 5% … etc
- We have the tax codes as the same, but we have a Place of Supply field
as a custom field in all invoices and we have a report where total sales
and total taxes due can be sorted by Place of Supply, place of supply could
be a custom field with an editable dropdown (in many countries bifurcation
by place of Supply of goods and services is I think required so this could
help others also)
The issues surrounding this new tax scheme raise similar issues I have discussed with @lubos several times in the context of multi-jurisdictional sales taxes. A basic tax code includes several components. Most customers are taxed at the full rate. But there are exceptions based on where delivery occurs, whether the customer is exempt from some or all tax components, whether the item is exempt from some or all components, and what category of goods or services is involved. The number of possibilities quickly becomes a multi-dimensional matrix. Then, when it is time to file with multiple tax authorities, it is necessary to extricate all the components from one another.
A solution that would address the situation I describe would also address yours. @lubos has acknowledged the shortcomings of the current tax scheme in Manager, but improvements have yet to be released.
Wouldn’t having the individual state tax codes (as built-ins) automatically indicate place of supply, Therefore sales and tax reporting would fall naturally within current Manager processes without requiring custom fields and exporting / resorting.
Adding tax code to the Customer, would assist in eliminating per line selection.
Yes, I think that’s the best solution. But after first saying the UAE codes would be sufficient, @Taher_Nomani seemed to then say separate codes were needed, then seemed to go back to recommending a single UAE code, but applied by customer rather than inventory item. So I’m still not sure what he thinks is best. If you reread my posts in order, I recommended separate codes by state as soon as it was mentioned that there was a need to divide taxes that way.
Codes by customer might help, but I can also see complexities, because taxes have to be saved by line item in case of credit notes. I think they’d all still have to be editable.
I think providing a basic workable solution has got mixed up with users advancing enhanced solutions.
The essential question was this - “can we in the tax codes bifurcate codes by UAE states as that is a requirement for VAT return filling.”
The simplistic answer is yes, and the most business efficient way “today” of doing this is by adding the individual state codes then the VAT filing becomes simply a natural extension of Manger’s default reporting.
It’s understandable that for those who are not use to tax code selection by line are looking for alternate solutions.
What you have both written is quite valid. I had first suggested to have different Tax Codes for each state, but when I started physically entering the invoices I realized I would have to change the tax code for each line item for every invoice as I couldn’t set a default rate by customer, that is when I decided to not use different Tax codes but a custom field for place of supply and then export sales and calculate VAT based on the sales using Excel, which will be my current practice.
Although would love to have this functionality in manager for getting tax reports bifurcated by Place of Supply.
Then individual state codes are required, otherwise you end up with different UAE users using inconsistent methods to get the exact same result.
I understand there would be different inconsistent methods, but having individual state codes is not a physically usable solution, it would be extremely time consuming and it will just discourage users from using the software, as it would be very difficult to set tax code for each line item for every invoice.
Until the state tax codes can be set by customer, it would not be a usable solution.
Regardless if you use a common UAE tax code or an individual state tax codes - you still need to “set a tax code for each line item for every invoice”.
So unsure where this becomes “extremely time consuming” especially as you will be duplicating your Manager inputs by 1) selecting a place of supply (per invoice) and 2) entering a tax code (per line), as well as externally by 3) exporting sales and 4) calculate VAT using Excel.
Compared this to 1) just selecting a state tax code (per line) and have Manager 2) produce all the correct reporting.
You can currently set tax code inventory item wise or even to the general sales account in coa and it will automatically selected you dont have to set the tax code all the time.
@Taher_Nomani, after reading this entire thread again, I must agree with @Brucanna’s points. The entire program is set up to apply tax codes by line item. Yes, there are some shortcuts by applying tax codes to inventory items or sales accounts. But they are only that: shortcuts. All they do is simplify applying tax codes to line items.
You and every other UAE user faces an immediate problem, because your new tax scheme is now in effect. The entire underlying tax module for Manager is not going to be rewritten just to accommodate UAE needs. So the question is how can the program be made to work for UAE users in the very short term.
If separate-state reporting is a requirement, the only feasible solution is multiple tax codes. This will give you everything you need, even if you find entering tax codes line by line to be tedious. I will communicate with @lubos to be sure he sees the relevant parts of this thread.
When exporting goods or when there are zero rated supplies there we don’t
need any bifurcation by state. We just have to mention total value of zero
Also please consider allowing tax codes to be set by customer.
This will probably never happen as VAT and other tax code types are chargeable upon products & services (sales). A customer is not a goods or service so is not taxable, besides which, there would be a conflict if a customer was set to one tax code and a product/service being sold to them was set to a different tax code - which tax code wins ?
Then it seems the logical and most straight forward way to implement the
changes would be to add a place of supply field in the invoice and tax
rates should be calculated based on the place of supply. As the UAE VAT 5%,
0% are the standard rates and if place of supply is mentioned in invoice,
sales and tax amounts in all tax reports should be bifurcated by place of
If place of supply is outside the UAE, the tax is automatically considered
as zero rated.
And if the purchase is an import automatically the system considers the VAT
as zero rated.
This is the method currently being used by other softwares, where place of
supply of customer is set and tax is bifurcated using that place of supply.
Also when adding purchases if an import invoice is selected then the tax is
considered reverse charged.
Sorry, imports are considered as Reverse Charged VAT not zero rated.
At this point, “place of supply” on UAE Invoices would be a custom field created by UAE users and currently custom fields don’t get transferred / added to reports.
But the developers may have other considerations.
Please consider adding a select for all line items tax codes.
Also two concerns:
For purchases we don’t need to bifurcate the tax by state, so we would
need the main VAT 5% tax code for purchases.
Also for Reverse charged VAT will there be a separate tax code as that
needs to be mentioned separately as well.
Please note zero rated purchases and sales there is no need for different
tax codes as it is a single value required for both, so a single code of
VAT 0% would suffice.
This is not how things will work. Your VAT is offsetting, meaning input VAT is subtracted from output VAT to determine what you need to remit. Therefore, you must use the same tax codes.
This is also not how Manager works. Again, because VAT is offsetting, you simply select the same tax code for a purchase. “Reverse charged VAT” is not defined in the decree-law as anything different from input VAT.
Do not be so quick to assume this. A single 0% code will not allow reporting of zero-rated transactions by emirate. Is that really how things will work? Will you not need to show what was “taxed” in each jurisdiction, regardless of whether the tax rate was 5 or 0%?
Not necessarily, the individual state codes is only required for the reporting of not for the remitting of.
The tax collection is handled centrally so the user is only making the one payment - Total VAT Collected less Total VAT Paid - they are not making individual state remittances.
As I understand it, this applies to imports where there is no VAT charged on the invoice, so the supplier gets paid the invoice value, but the purchaser has to show the “related” input VAT on that supply in addition to it being also an output VAT.
And this is not required, as the per state VAT is for revenue sharing purposes and there is no revenue with 0%