Understanding VAT Processing in Treasury Management

The VAT functionality in Treasury Management enables you to automatically process VAT accounting entries for VAT applicable transactions. Your use of VAT in Treasury Management deals in large part with setting defaults and applying these at the business unit, bank, bank branch, and accounting template levels. The objective is to calculate and create a variety of VAT accounting entries to record not only the tax, but also simultaneously record the recoverable, nonrecoverable, and rebate portions of the VAT at the accounting line level.

For PeopleSoft applications, primarily all of the VAT calculation values are derived from the VAT global defaulting architecture. The VAT defaulting architecture uses VAT Drivers, which are certain information elements on a VAT transaction that determine or "drive" the VAT processing for that transaction. (See the section Treasury Management VAT Drivers Table in this topic for a list of Treasury specific VAT drivers.) To establish a VAT defaulting hierarchy, you must first define the overall VAT environment for your system, and then define Treasury Management VAT driver defaults on the global setup pages. For Treasury Management VAT processing, these global setup pages are accessed from the Bank Information, Bank Branch Information, Accounting Templates, and Treasury Options pages.

Treasury Management transaction sources affected by VAT are fees and interest sources. You generate or enter these transactions on the External Transactions - Treasury VAT Processing page or the Enter Fees (Fee Generator) page. When force reconciling transactions in the Automatic Reconciliation Exceptions (Bank Statement Processing) page, VAT transactions are created, where applicable, as the balancing external transaction is created (likewise, in the Bank Statement Accounting process, VAT transactions are created for any applicable external transaction created).

Though VAT is applicable to both goods and services, Treasury Management records VAT only on service transactions. As such, the Physical Nature field shown on certain pages always displays the value Services.

Once the setup, transactional, and accounting information is in the system, you can also run inquiries and reports on your VAT information.

As shown in the illustration, the four Treasury Management setup pages derive VAT calculation values from the primary default architecture. These VAT values are then used by the system when calculating VAT for Treasury Management accounting entries.

Important! Refer to the following documentation before establishing the primary VAT defaulting hierarchy for your system and setting up VAT for calculating Treasury Management transactions.

See Understanding VAT.

Here's how to work with VAT in Treasury Management, from start to finish:

  1. Define all VAT setup information, both on general system and Treasury Management specific pages.

  2. Create VAT entries on either the External Transactions or Fee Generator pages (or automatically through the Automatic Reconciliation Exception page or the Bank Statement Accounting process).

  3. Process VAT accounting through the Automated Accounting page.

  4. View VAT information on VAT Accounting Summary or VAT Inquiry pages.

  5. Process VAT transactions through the system using the VAT Transaction Loader page.

  6. Create VAT reports.