Conditional Sales Tax Setup Guide for MSD365 Finance and Operations

In this Blog, I will articulate how we can setup the Conditional Sales tax functionality and how the same is paid to Govt/ statutory authority.

For some of the countries, especially in Europe, the Sales tax authority allows for sales taxes and base amounts to be reported when the invoice is paid, not when that goods and service is received.

Example~

On June 10, you create an invoice of 10,000 plus 2,500 in sales tax.

On July 10, you report taxes for June. The 2,500 is not included in the sales tax payment, because the invoice has not been paid.

On July 15, the customer pays half of the invoice amount, 5,000, plus 1,250 in sales tax.

On August 10, you report taxes for July. The 1,250 is included in the sales tax payment.

When the customer settles the invoice with a second payment of 6,250, the remaining sales taxes are reported and paid.

This setup will be done by~

1.     Create separate main accounts for sales taxes on invoices that are awaiting settlement

2.     Create separate sales tax ledger posting groups to control the posting of conditional sales taxes to the separate main accounts.

3.     Create a separate settlement period for conditional sales taxes

4.     Create and align two sales tax codes: 

5.     Set up sales tax groups and item sales tax groups

6.     Select the Conditional sales tax check box in the Sales tax area of the General ledger parameters form.

 

1.     Create a main account for conditional sales tax and Posting type field, select Sales tax.

I have created two main accounts, one for input VAT, and another for Output VAT

The below is for Output Conditional


The below is for input conditional



2: Create separate sales tax ledger posting groups to control the posting of conditional sales taxes to the separate main accounts.

See below, I have added two new main accounts to the Payable and receivable tax side.

3:  Create a separate settlement period for conditional sales taxes

4:     Create and align two sales tax codes: 

Lets create a tax Code, which one will be reported originally into the VAT settlement once the amount is paid or received as per the requirement

Lets create the code which we need to use while booking transaction.

Note- it is very important to correctly setup the below, the whole process is dependent on this setup.

a) Select new settlement period we created for Conditional tax reporting

b) Select the new ledger posting group we have created for Conditional tax reporting

c) Add the main account we have created for original tax reporting when the payment is made.

5:     Set up sales tax groups and item sales tax groups- You can add one sales tax group and item sales group for this code

6:     Select the Conditional sales tax check box in the Sales tax area of the General ledger parameters form.

The setup is done, now we shall take a look how this works



However, it wont come in our VAT settlement, because we separated this code into other settlement period called "COND"

It will only come when the transaction amount is paid, see below, I have paid the amount on 05th Aug’2020, and that is partial payment 6500, so that amount only reported  into Settlement with “Main Tax” code we have setup in Conditional tax code itself.

The rest amount will be reported once that is paid






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