Work with VAT on Sales and Purchases

Updated on May 14, 2022

Your country’s or region’s value-added tax (VAT) requirements can be met by setting up Business Central to compute and report VAT. See Setting Up to Calculations and Posting Methods for Value-Added Tax for additional information.

Some VAT-related duties, on the other hand, can be completed manually. If, for example, you discover that a vendor utilises a different rounding method, you may need to alter the posted amount.

Tip

Documents can be validated using Business Central’s VAT registration numbers and other firm information. Validating VAT registration numbers can be found here.

Calculating and Displaying VAT Amounts in Sales and Purchase Documents

Business Central automatically populates the Unit Price and Line Amount fields on a sales or purchase document when you select an item number in the No. field. The unit price is derived from either the Item card or the item pricing that are allowed for the item and client at the time of purchase. When you enter a quantity for a line, Business Central automatically calculates the line amount.

If you’re selling to retail customers and want the unit prices and line amounts to include VAT, tick the Prices Including VAT box on the page. Including or excluding VAT in prices and line amounts has more information.

In sales and purchase paperwork, the type of customer or vendor you’re working with influences how VAT amounts are calculated and displayed. For example, you can manually adjust the computed VAT amount to match the VAT amount calculated by your vendor on a particular transaction.

Including or Excluding VAT in Prices and Line Amounts

The Unit Price and Line Amount fields in a sales document will include VAT if you select the Prices Including VAT check box. VAT is not included by default in these values. Pricing includes VAT if the field’s name indicates that it does.

In the Prices Including VAT column on the Customer card, you may select the default option for all sales papers for a customer. You can also choose to include or remove VAT in the pricing of an item. Prices on the Item Card are usually exempt from VAT, although this is not always the case.

If you haven’t set up pricing on the Sales Prices page, the following table shows you how the application calculates the quantities per unit price for a sales document:

Price Includes VAT field on Item Card Prices Including VAT field Action Performed
Not Enabled Not Enabled The Unit Price on the Item Card is copied to Unit Price Excl. VAT field on the sales lines.
Not Enabled Enabled The application calculates the VAT amount per unit and adds to the Unit Price on the Item Card. This total unit price is then entered in the Unit Price Incl. VAT field on the sales lines.
Enabled Not Enabled The application calculates the VAT amount included in the Unit Price field on the Item Card using the VAT percentage related to the VAT Bus. Posting Gr. (Price) and the VAT Prod. Posting Group combination. The Unit Price on the Item Card, reduced by the VAT amount, is then entered in the Unit Price Excl. VAT field in the sales lines. For more information, see Using VAT Business Posting Groups and Customer Price Groups.
Enabled Enabled The Unit Price on the Item Card is copied to Unit Price Incl. VAT field on the sales lines.

Using VAT Business Posting Groups and Customer Price Groups

There are various ways in which a VAT business posting group can be used in order to determine how much VAT should be included in the pricing. Set up VAT business posting groups has further information.

You have a few options when it comes to assigning a VAT posting group to clients or sales papers, depending on your needs:

Select a VAT Business Posting Group (Price) on the Sales & Receivables Setup page to apply the same VAT rate for all customers.
VAT Business Posting Group (Price) can be selected on the Customer Card page to apply the appropriate tax.
The **VAT Business Posting Group (Price)** field on the Customer Price Group page allows you to select a group of customers for which you want to apply a VAT rate. In the case of a pricing being applied to all clients in a given geographic area or industry, this can be a beneficial tool.
On all VAT Business Posting Group sales paperwork. Your document is the only one in which the VAT amount supplied for the group is used.
Note

The VAT Business Posting Group (Pricing) column must be filled in for VAT to be included in the price.

Examples

Factors such as where you’re selling and what industry you’re in can affect the amount of VAT you must account for. For example, a restaurant might charge 6% VAT for in-house meals and 17% VAT for takeout. This is done by creating two VAT business posting groups (price) for in-house and takeaway.

Correcting VAT Amounts Manually in Sales and Purchase Documents

You can alter submitted VAT entries so that you can change the total sales or purchase VAT amounts without affecting the VAT base. If a seller sends you an invoice with the erroneous VAT amount, for example.

Regardless of how many combinations you have set up to handle import VAT, you must set up at least one VAT product posting group. Unless you may use the same general ledger account in the Purchase VAT Account box on the VAT posting setup line, you can call it CORRECT for correction purposes. See Setting Up to Calculations and Posting Methods for Value-Added Tax for additional information.

As long as an invoice total contains VAT, the discount amount is returned to the customer when the payment discount is granted. Keep in mind that the Adjust for Payments Disc. field must be enabled in the general ledger setting as well as in the VAT posting setup for certain combinations of a VAT company posting group and a VAT product posting group.

To set the system up for manual VAT entry in sales documents

Sales documentation can be manually updated to allow for VAT changes. On the Purchases & Payables Setup page, the methods are very identical.

When setting up your General Ledger, you’ll want to allow for a maximum VAT difference between what’s calculated automatically and what’s entered manually.
Set up a checkbox in the Allow Vat Difference column in the Sales & Receivables Setup page.

To adjust VAT for a sales document

The required order should be opened.
Go to the Statistics menu and select an action.
On the Invoicing FastTab, select the number of tax lines from the drop-down menu.
Make changes to the VAT Amount text box.
Note

Each line of the invoice displays a total VAT amount, broken down by VAT identifier. The VAT Amount column on the lines for each VAT identification can be manually adjusted. It is important that you specify a difference in VAT that does not exceed the maximum difference allowed when editing the VAT Amount field. A warning message will appear if the amount entered is greater than the Max. VAT Difference Allowed. You will not be able to proceed until the amount is modified to fit within the permitted limits. Enter a new VAT Amount that falls within the permitted range and click OK. Document lines with the same VAT identifier will be split proportionally if the VAT difference is equal to or less than the maximum allowed.

Calculating VAT Manually Using Journals

Adjusting VAT amounts in general, sales and purchase journals can also be done. You might have to do this, for example, if you submit a supplier bill into your journal and the VAT amount estimated by Business Central differs from the VAT amount on the supplier bill.

To set the system up for manual VAT entry in a general journals

Before manually entering VAT in a general notebook, you must do the following steps.

When setting up your General Ledger, you’ll want to allow for a maximum VAT difference between what’s calculated automatically and what’s entered manually.
Ensure that the Allow VAT Difference checkbox is checked on the applicable journal’s General Journal Templates page by clicking on it.

To set the system up for manual VAT entry in a sales and purchase journals

Before you can manually insert VAT into a sales or purchase diary, you must complete the following procedures.

Select the Allow VAT Difference checkbox on the Purchases & Payables Setup page.
For the Sales & Receivables Setup page, repeat step 1.
The VAT Amount field on the general journal line or the Bal. VAT Amount field on the sales or purchase journal line can be modified when the above-described setup is complete. With Business Central, you can rest assured your difference isn’t larger than the limit you’ve set.
Note

In this case, the maximum difference is displayed as a warning if the difference is higher. Amount adjustment is necessary to proceed. Enter a quantity that falls within the permitted range by pressing the OK button. The VAT Difference field in Business Central displays the difference if the VAT difference is greater than the maximum allowed.

Posting Import VAT with Purchase Invoices

Use a purchase invoice instead of journals to post an import VAT bill.

To set up purchasing for posting import VAT invoices

Make an account for the import authority that sends you the import VAT invoice, and then log in with that account. General ledger accounts for import taxes must be set up in the same way as general ledger accounts for the general ledger accounts.
A Gen. Product Posting Group for the import VAT and a Gen. Product Posting Group for the relevant Gen. Product Posting Group should be created.
Enter Chart of Accounts into the Tell Me feature by clicking the Lightbulb symbol, then select the relevant link.
Select the general ledger account for import VAT, and then click the Edit button to make changes.
FastTab Postings, select Import VAT from the drop-down menu. The VAT Prod. Posting Group field is automatically filled up by Business Central.
Open the Tell Me feature by clicking on the Lightbulb symbol and entering General Posting Setup. Then select the relevant link.
The VAT authority should combine the General Business Posting Group with the General Product Posting Group for import VAT. Select the import VAT general ledger account in the Purchase Account column for this new combination.

To create a new invoice for the import authority vendor once you have completed the setup

Open the Tell Me feature by clicking on the Lightbulb button, then type in Purchase Invoices and select the relevant link.
Create a new invoice for the purchase of goods or services.
Click OK after selecting the import authority vendor in the Buy-from Vendor No. column.
Choose the import VAT general ledger account in the Type and No. fields on the purchase line.
Type 1 into the Quantity field.
Enter the VAT amount in the Direct Unit Cost Excl. VAT box.
Invoices should be mailed.

Processing Certificates of Supply

A certificate of supply must be sent to the customer when you sell items to a customer in another EU country or region. A similar process applies to the processing of supplies for shipments of service and return to vendors as well as shipments for sales.

To view certificate of supply details

The Tell Me function can be accessed by clicking on the Lightbulb icon, entering Posted Sales Shipments, and then selecting the corresponding link.
To ship a product to a customer in another EU country/region, select the appropriate shipment.
Select the Certificate of Supply Details.
Customers that have selected the Certificate of Supply Required checkbox for VAT Posting Group setting will have the Status field set to Required. In order to know if a customer has returned the certificate, you can change the value in the field.
Note

A record is created and the Status column is set to Not Applicable if the VAT Posting Group setup does not have the Certificate of Supply Required checkbox enabled. You have the ability to make changes to the field to reflect the current condition. The status can be manually changed from Not Applicable to Required and back again.

A certificate is created when you change the Status field to Required, Received, or Not Received.

Tip

The Certificates of Supply page can be used to see the current status of all shipments for which a certificate of supply was created.

Select Print Supply Certificate.

The document can be viewed or printed. As soon as you click Print Certificate of Supply, a Printed checkbox will be checked. As a result, if the certificate is not already required, it is set to that status. You can send a printed copy of the certificate with the shipment if necessary.

To print a certificate of supply

The Tell Me function can be accessed by clicking on the Lightbulb icon, entering Posted Sales Shipments, and then selecting the corresponding link.
To ship a product to a customer in another EU country/region, select the appropriate shipment.
Select the action to print the certificate of supply.
Note

On the Certificate of Supply page, you may also print a certificate.

Select the Print Line Details check box to include information from the lines of the shipment document in the certificate.
Business Central can generate certificates for shipped items that don’t have them if the Create Certificates of Supply if Not Already Created check box is selected. New certificates will be issued for all shipments that do not have certificates within the given range when the checkbox is checked. ‘
The default filter settings are for the shipment document that you’ve selected.. To print a specific certificate of supply, fill in the filter information.
Choose Print or Preview from the Certificate of Supply page’s drop-down menu to print or read the report.
Note

Shipment status and printed status are updated on a Certificates of Supply page for a shipment.

Make sure the buyer signs the printed certificate of supply.

To update the status of a certificate of supply for a shipment

The Tell Me function can be accessed by clicking on the Lightbulb icon, entering Posted Sales Shipments, and then selecting the corresponding link.

To ship a product to a customer in another EU country/region, select the appropriate shipment.

You can select a status from the drop-down menu.

If the signed certificate of supply has been returned by the customer, choose Received. We’ve made a change to the Receipt Date. The current work date is used as the default value for the receipt date.

Your signed certificate of supply can be changed to reflect when you received it from the customer. The signed certificate can also be linked to using the normal Business Central connection method.

Select Not Received if the customer fails to return the signed certificate of supply. The previous invoice will not be approved by the tax authorities, therefore you must give the customer a new invoice that includes VAT.

From the Certificates of Supply page you can see a group of certificates, and you may update the status of outstanding certificates when you receive them back from your clients. If you want to find all certificates with a specific status, such as Required, and change their status to Not Received, you can utilise this.

To update the status of a group of certificates of supply

  1. Choose the Lightbulb that opens the Tell Me feature. icon, enter Certificates of Supply, and choose the related link.
  2. Filter the Status field to the value that you want in order to create the list of certificates that you want to manage.
  3. To update the status information, choose Edit List.
  4. In the Status field, choose the relevant option.If the customer has returned the signed certificate of supply, choose Received. The Receipt Date field is updated. By default, the receipt date is set to the current work date.You can modify the date to reflect the date that you received the signed the certificate of supply. You can also add a link to the signed certificate using standard Business Central document linking.

 Note

You cannot create a new certificate of supply on the Certificate of Supply page when you navigate to it using this procedure. To create a certificate for a shipment that was not set up to require one, open the posted sales shipment, and use either of two procedures described above:

  • To manually create a certificate of supply certificate
  • To print a certificate of supply.