About recognising the pending VAT on documents
By using the On documents VAT recognition method, you recognise VAT amounts calculated in the unpaid documents that are subject to pending VAT. You can initiate the recognition process by using any needed date.
Initiation of the VAT recognition process
You initiate the process of recognising the pending VAT the Recognise input VAT (TX503500) window or the Recognise output VAT (TX503000) window, depending on whether input or output taxes should be recognised.
In one of these windows, you specify the following selection criteria, which the system uses to load the documents:
- Date
- The documents with a date earlier than or the same as the specified date are loaded. By default, the current business date is specified. To load the documents with any date to the window, clear this field.
- Branch
- The branch from which documents are loaded.
- Tax agency
- The tax agency that is associated with the VAT of the Pending type to be processed.
- VAT ID
- The VAT code that was used for calculating the VAT amounts to be recognised by the process. Only the VAT codes associated with the selected tax agency are available for selection. You can leave this field empty, so that the documents subject to all available pending taxes associated with the agency will be loaded.
In the top part, you should also make sure the VAT recognition method is On documents. By default, the option specified for the tax agency you have selected is shown.
Once the documents are loaded to the table, you select one item or multiple items in the list, and initiate the process by clicking Process in the window toolbar. (To process all listed items, you click Process all.)
For each document to be processed, the VAT doc. no. value should be specified in the table. This number is either inserted by the system automatically or entered by a user manually, depending on the option specified for the tax agency in the Input VAT entry ref. no. or Output VAT entry ref. no. field on the Tax agency settings tab of the Suppliers (AP303000) window.
When you run the process of recognising the pending VAT, the system generates a general ledger batch (or multiple batches) to move the VAT amounts from the pending accounts to the actual VAT payable (or VAT claimable) accounts.
Example of general ledger transactions generated when pending VAT is processed
This section provides an example of the general ledger transactions that the system generates when it processes a customer invoice that is subject to pending VAT.
Suppose your company issues a €1000 invoice dated 01.01.2020 for services. The services are subject to a 7% VAT. When this invoice is released in the system, the system creates the following entries in the General ledger.
| Account | Date | Debit | Credit |
|---|---|---|---|
| Customer ledger | 01.01.2020 | 1070 | - |
| Sales (as an example) | 01.01.2020 | - | 1000 |
| Pending VAT payable | 01.01.2020 | - | 70 |
On 01.31.2020, you run the VAT recognition process. The system generates the following general ledger transactions once the VAT recognition is completed.
| Account | Date | Debit | Credit |
|---|---|---|---|
| Pending VAT payable | 01/31/2020 | 70 | - |
| VAT payable | 01/31/2020 | - | 70 |
You can view the generated general ledger transactions in the Journal transactions (GL301000) window by using the Batch number link available in the table.
You specify the Pending VAT payable account and the VAT payable account (as well as the Pending VAT claimable account and the VAT claimable account) for each particular VAT code on the General ledger accounts tab of the VAT (TX205000) window.
The amounts posted to the VAT payable or VAT claimable account will be included in the VAT report, which you create in the Prepare VAT report (TX501000) window.
Parent topic: Recognition of pending VAT - overview