1. Set the Oracle Payables system options to the following values:

Set Discount Distribution Method to either Prorate Tax or Prorate Expense

Set Exclude Tax for Discount to No

Set Automatic Tax Calculation to Yes

Set Require Tax Entry to Yes

2. Set up VAT codes for each type of VAT, such as Domestic Rates, Intra EU, and Outside EU.

3. Set up a separate General Ledger Account for each VAT code.

4. Complete all transfers from Oracle Payables to Oracle General Ledger and post the resulting journals.

Note: If a transaction is not transferred to General Ledger, the transaction does not appear in the report. Invoices with the status Never Approved will not appear in the report because the invoices did not get transferred to General Ledger. Invoices on hold, however, with an Allow Post = Yes on the invoice approval code are transferred to General Ledger during the AP to GL Transfer, and appear in the report once the transfer is complete.

If the resulting journals are not posted in General Ledger, the General Ledger Balance for the VAT Account will not correspond with the sum of VAT on the transactions for that VAT code and will appear in the Other Difference to VAT GL Balance column on the report.