Entering Third-Party, VAT-Only Invoices

Generally, a third-party, VAT-only invoice is received following a purchase imported from outside your country, or if you are located within the European Union, from outside of the European Union. A VAT-only invoice (perhaps with freight and miscellaneous charges as well) arrives after the purchase, usually from a customs agent of the country that received the goods.

This means that when you receive a VAT-only invoice from a third party, there is usually also an invoice from the original merchandise supplier to which the third-party invoice is related. Most often that original voucher will have been recorded as in Import transaction for VAT purposes, and you enter the third-party voucher to record the customs VAT payable on that purchase. You generally record the third-party VAT-only voucher as a Domestic transaction. The result is that you have two vouchers in the system with much of the same transaction information. As such, be careful not to report the purchase amount on the VAT return twice.

If the voucher lines are flagged as exempt, outside of scope, exonerated, or suspended, the VAT Transaction Loader selects them only from the original purchase voucher. No special handling is required for these. If you must include these voucher lines on your VAT return, create your VAT report definition so that you are selecting these transactions based on the information specified on the original purchase invoice.

However, if the voucher lines are flagged as taxable, the VAT Transaction Loader selects them from both the original purchase voucher and the third-party voucher and loads both into the VAT Transaction table. This can result in purchase amounts being reported twice. The way to handle taxable transactions for reporting purposes depends on the VAT reporting requirements in your country:

• If your country requires that you report each transaction separately, you must report the taxable purchase amount from the voucher that records the import transaction and report the customs VAT applicable to that purchase from the third-party voucher. These may or may not appear on the same VAT return.

• If your country requires that you report the taxable purchase amount from the customs invoice, rather than the original purchase invoice, you must report both the taxable purchase amount and the customs VAT amount from the third-party voucher.

In either situation, you can avoid reporting the taxable purchase amounts on these transactions twice by making the VAT transaction types for the third-party voucher lines different from the original voucher lines:

• Define a default transaction type for import purchases at a level in the payables VAT default hierarchy that is appropriate for your organization.

• Define a different default transaction type for domestic transactions that indicates customs VAT at a level in the payables VAT default hierarchy that is appropriate for your organization, usually the supplier.

  Note: If you have also defined a default transaction type for domestic transactions at the item level, this value will override any value you define for the supplier. In this case, you must enter the customs VAT transaction type directly on the third-party voucher line, using the Invoice Line VAT Defaults page.

Then, when you create your VAT report definitions, indicate the transaction type that should be included on the report's line for total purchases:

• If your country requires that you report the taxable purchase amount from the original purchase invoice, specify the VAT transaction type you set up for imports.

• If your country requires that you report the taxable purchase amount from the customs invoice, specify the VAT transaction type for domestic purchases that you set up for customs VAT.

Example

Let's say an organization located in Canada purchases goods for 750.00 USD from the United States. The voucher for the original purchase invoice is recorded with a VAT Treatment Group of Import, and has two lines, one marked Import (IMP) and the second marked Exempt (EXMPT). The purchase amount is recorded as 990.00 CAD. The goods pass through Canadian customs and the customs authorities estimate that the goods are worth 1000.00 CAD. A customs invoice for 35.00 CAD is received and recorded as a third-party VAT-only voucher with a VAT Treatment Group of Domestic Purchase.

The original purchase voucher distribution lines are:

VAT Applicability	VAT Transaction Amount	VAT Basis Amount	VAT Amount	VAT Transaction Type	VAT Distribution Status
Taxable	495.00	495.00	0.00	IMP	Not yet
Exempt	495.00	495.00	0.00	EXMPT	Not yet

The third-party voucher distribution lines are:

VAT Applicability	VAT Transaction Amount	VAT Basis Amount	VAT Amount	VAT Transaction Type	VAT Distribution Status
VAT only	500.00	500.00	35.00	CSTMS	Not yet
Exempt	500.00	500.00	0.00	EXMPT	Ignore

In the VAT transaction table, the lines are recorded as:

VAT Document ID	VAT Transaction Amount	VAT Basis Amount	VAT Amount	VAT Transaction Type
1	495.00	495.00	0.00	IMP
1	495.00	495.00	0.00	EXMPT
2	500.00	500.00	35.00	CSTMS

To report the taxable purchase amount based on the customs invoice, define the VAT report with the following values:

VAT Report Line	VAT Transaction Types to be Included on Report Line	Amount Reported on VAT Return
Total purchases	CSTMS	500.00
Total recoverable input VAT on purchases	CSTMS	35.00

Currency Conversion for VAT-Only Third-Party Vouchers

Generally a VAT-only invoice is received following a purchase of goods from a foreign country, and this invoice is often in your local currency. Customs agencies generally use their own exchange rate to translate from a foreign currency to the local currency, therefore making it impossible for the system to translate the line and distribution line amounts to the local currency accurately when copying those amounts from the original voucher to the third-party voucher. Therefore, the system does not copy an amount to the line when the source document and the third-party supplier's currency differ.

In this case, the system copies all line information, but copies the amount on both the line and the distribution line as 0.00. The system issues a warning message indicating that 0.00 will be copied to the lines, because the currency of the source document does not equal that of the third-party supplier.

If the currency on the original voucher and the VAT invoice are different, you must manually translate the amount that is copied into the distribution from the original voucher to ensure that the VAT basis amount is correct.

Note: Oracle recommends that you set VAT tolerance checking very high for a customs agent, and any other supplier that is typically third-party, to take into consideration the currency conversion differences between the import supplier and the customs agent.

Unlinkable VAT-Only Vouchers

If you receive a VAT-only voucher that does not provide enough information to enable you to link it to the original purchase voucher, enter the following information on the third-party voucher:

Term	Definition
Currency	Defaults from the supplier.
Account	If you need to prorate non-recoverable VAT, miscellaneous, or freight, you must enter the appropriate expense account number. If you are not prorating, you do not need to changed the default account number.
Amount	To save the voucher and calculate a VAT basis amount, you must enter the distribution amount manually.

Here is what happens on the various VAT pages in the Voucher component (VCHR_EXPRESS):

• The values on the Invoice Header VAT Information page default based on the defaulting hierarchy.

• Once you have entered the freight, VAT and distribution line amounts, you can calculate the VAT on the Invoice Summary VAT Information page.

• The VAT use type on the Invoice Line VAT Information page defaults from the supplier. To ensure that accounting entries are calculated correctly, you must also enter the VAT applicability as Taxable on this page.