I’ve been working on creating a localization, and I think most of it is done. However I have two questions about handling some things in Manager and whether or not this is something possible to achieve.
So, there is field in the vat statement for “Other taxes” which is, mostly, used for when a company becomes part of the VAT system and previously it was not.
For example: I have a bunch of inventory items for sale. I wasn’t deducting VAT previously on their purchase, but now that I’ve entered the VAT system, I can deduct.
The most obvious solution to this would be to calculate the tax manually and post a journal entry for the calculated amount. Is there any way to capture this in the localized VAT report? Or should this be somehow done via additional tax codes that are going to be used in this specific situation?
Second, for the above transactions and another tax code, the VAT report has to include details about invoices relating to those transactions. Is it possible to achieve that via the report transformations form?
For once off tax report entries it is hard to justify building in specific support as the difficulty in explaining how to use any built in system is likely to be similar to explaining the usual manual method. Even though adding another tax code and picking it up in your localisation would be relatively easy.
Your question about displaying details of transactions using a particular tax code is more difficult. While I haven’t looked specifically, I’m not aware that localisation support this. How often is it needed and how many transactions typically would need this type of reporting? I assume you currently use a custom report for this.
I was considering adding another tax code but then I have the issue with time/dates. For example if I buy inventory in May 2019, start reporting for VAT in January 2020, how and when will I apply the tax code so that the report shows VAT for Q1 2020, but also has all these transactions from May 2019?
I personally don’t use any of this. But I was hoping to create a complete localisation in case anyone else might need it. For example, if a construction company uses manager then they will need this all the time and with huge amount of transactions.
The time period can be specified for reports. I assume the results of this would be used to calculate the VAT entry. Which is then paid in the required financial year when first registering for VAT.
Which still leave some options of how the report is run ie manual or part of a localisation script.
If you just run your existing vat localisation for the proceeding year would that be close to giving the correct information even if the result needed to go in a different box. Assuming your exiting VAT work sheet gives the relevant information, a description of how to use it when first registering for VAT maybe all that is needed
The question is, is the calculated VAT value just a VAT return adjustment or also an accounting adjustment. If its just a VAT return adjustment, then it would be a manual adjustment and outside the localization as there is no Manager entry.
For an accounting entry - if you weren’t “deducting VAT previously”, therefore one would have been claiming the paid VAT as an expense. To reverse that previous VAT expense deduction would cause an artificial income, because the now “I can deduct”, is a BS transaction rather than a P&L.
On the date you become part of the VAT system, this switches on the charging and deducting of VAT in relation to transactions, rewriting the VAT on pre VAT system transactions to be post VAT system transactions has no real advantage - the increased VAT deduction v’s increased income tax.
It is a VAT return adjustment that reflects the value of the inventory on stock, but doesn’t do anything to previous years’ P&L od BS statements.
Assuming I bought 10 widgets in 2019 and still have 5 for sale in 2020, when I start reporting and deducting VAT I have to decrease the value of the inventory for the sum of the VAT and move that to the tax liability account.
Yes, and the tax code rate if using a Journal Entry would 100%. The inventory item would be credited for the value of the tax previously paid and the Tax Payable account would be debited using the 100% tax code. This would take up the tax adjustment / transfer.
If that is the case, then instead of the Journal Entry you would do a zero value Purchase Invoice dated Jan 1. The first line would reverse (negative quantity) the inventory as at Dec 31, and the second line would add back the same inventory but using the specific tax code for this situation.
The zero value Purchase Invoice could reference the original transaction if required, but the original transaction itself can’t be used as part of its inventory could have already been sold.
@novica, you might want to think about the value of trying to create a localization that automatically covers transition from one taxation regime to another (such as non-VAT-registered to VAT- registered, among other possible changes). It simply may not be worth the effort. Procedures can vary widely from jurisdiction to jurisdiction, depending on what is being done. And the support of qualified accountants may be necessary.
As one example, in the USA, simply changing from cash to accrual basis accounting requires submission of an 8-page form that may need to include accounting data from three prior years and be supported by some of dozens of possible supplemental statements. There is no way localization of any accounting report could possibly encompass all the decisions involved or incorporate all the financial information.
Likewise, in most jurisdictions, registering for VAT is a one-time event, probably entailing a number of unique situations for any given business. The implementation effort for the business to enable a localization covering all those might never be justified. Look, for example, at the setup required to implement the single touch payroll localization for Australia. That is worth the effort, because it will be used for every subsequent payslip and filing. But adjustments for the one-time switch to VAT-registered may not be.
@tut you might be right, but I feel like this is not only about a localized report – although it started like that.
I think what @Brucanna wrote in the previous post is a possible solution to the bigger question of how to implement the move from non-VAT to VAT, regardless of the specifics of the report. After all even a one time event needs to be properly logged in the accounting system, and finding the best workflow for Manager is useful.
The implementation of the report afterwards seems to be trivial.
You may also have the option to do nothing. Whilst the law may permit the adjustment, does it make it mandatory.
Doing nothing just means you will have a higher value of inventory until that non-vat inventory is sold. Once sold, this will transfer to being a higher value of cost of sales and hence lower profit and profit tax.
So you have either, doing the adjustment and a higher vat refund or not doing the adjustment and a lower profit tax. Toss the coin.
For a once off VAT adjustment, to convert stock on a pre VAT scheme to VAT registered scheme (to ensure all transactions after the implementation date are VAT registered). I would recommend seeing an accountant who would request a stock take valuation at a particular date, clarify exactly what stock needs to be included and / or updated in Manager, then instruct me how to submit my first then subsequent VAT returns. Where the first VAT return is likely to be a manually edited version of Managers Vat worksheet printout.
Theoretically after the correct stock is accurately entered with correct tax codes before and after the change over date, Manager may then have the information to do the calculation itself. But due to the risk of these assumptions being incorrect in each individual case, and the simplicity of the once off calculation when accurate stock value is known. I suggest it is better Manager does not appear to do it all automatically.
Consulting an accountant or other qualified person aside, there is a need to explain workflow in Manager. One may have to consult an accountant for various issues: for example proper use of tax codes may require expert input, but we have an good reference points in Manager’s guides about how tax codes work in the app.
I will have do defer to your knowledge of Macedonia tax law here. A proper understanding of the details of what needs to be achieved to comply with your laws and the permissible options is the critical part. When that is understood and the most appropriate option for a particular client selected, actually documenting it in Manager should be relatively straight forward.
The VAT worksheet localisation Description field could be a good place to document recommended work flow in Manager when using Manager for VAT in Macedonia.