Understanding Accounts Payable VAT Calculations and Accounting Entries

Exclusive VAT Calculation for Vouchers

In the case of exclusive VAT vouchers, when you save the voucher, a VAT confirmation process takes place. The system calculates the VAT amount for each line based on entered VAT values and stores that amount on the distribution line. The system compares the calculated amount to the amount of VAT that you entered on the voucher header. If there is a discrepancy, the system compares the amount of difference against the VAT tolerance rules, as defined in your PeopleSoft Payables control hierarchy. If the difference is within tolerance, the voucher is accepted and the difference is allocated to the distribution line with the highest VAT basis amount upon running the Voucher Posting Application Engine process (AP_PSTVCHR). If the difference is out of tolerance, and you have set up VAT tolerance checking to issue a warning, the system alerts you with a warning message to check for input errors (you also have the option of having the system issue an error or not check for tolerances at all.) The system stores the calculated VAT amount on the voucher header, but the payment is always based on the VAT amount shown on the supplier's invoice.

Inclusive VAT Calculation for Vouchers

Another common processing scenario generally occurs with low monetary value invoices. In this case, known as VAT inclusive, the amount of VAT is not explicitly detailed on the voucher, but is included in the merchandise amount for each voucher line. The system calculates the amount of VAT for the voucher and stores the amount for reporting purposes. The system calculates the VAT at the line level and stores the sum of all VAT amounts, on all lines, on the voucher header.

Vouchers with a VAT Exemption

When your organization is VAT exempt, the VAT Exception Type is Exoneration. In this case, the transactions are treated as taxable at a zero-rate. This means that the transaction line would have a taxable type VAT Applicability (X) and a VAT code with a zero rate should be specified on the line. There is nothing that prevents you from entering a VAT amount on the header in this case—even if all of the lines are zero-rated. However, the VAT tolerance check occurs (unless you have opted not to use it), since the calculated VAT amount would be zero.

When the good or service is VAT exempt, the voucher line is flagged with a VAT Applicability of Exempt, and there is no VAT code on the line. In this case, you are not allowed to enter a VAT amount on the header if all lines are flagged as exempt. However, it is possible for a voucher to contain a mixture of taxable and exempt lines, in which case you can enter a VAT amount on the header.

Another type of VAT exemption occurs when you have been granted a temporary suspension from paying VAT. In this case the transaction line has a taxable-type VAT Applicability (S), and a VAT code with a zero-rate should be specified on the line.

Finally, when a transaction line is outside the scope of VAT, VAT calculation simply ignores the transaction (except in some exceptional circumstances). Like exempt goods or services, these lines have a VAT applicability of O, no VAT code on the line, and you would be unable to enter a VAT amount on the header if all lines are thus flagged.

Postponed or Self-Assessed VAT

In some cases, you are required to record both input and output VAT on a voucher. In this case, VAT is due on your purchase but has not been charged by the supplier. Instead of including the VAT in your payment to the supplier, you pay it to your country's VAT authorities. Examples of this include EC acquisitions, reverse charge transactions in Europe, and self-assessed GST in Canada. This may also be referred to as postponed VAT or self-imposed VAT. When VAT is self-assessed, the record output VAT flag is set to Y. If all of the voucher lines are self-assessed, then you enter no VAT amount; the system calculates the VAT amount for each line and stores the total on the voucher header.

If you have both self-assessed and non self-assessed voucher lines, any VAT amount entered on the voucher header applies only to the non self-assessed lines.