VAT Calculation Types and Declaration Points

The calculation type that you select determines the basis for calculating the VAT amount. You can select either gross or net as the calculation type. For example, assume that you have a sales amount of 100.00 EUR with early payment terms of 2 percent discount and a VAT rate of 8 percent. In this case, you would enter a VAT transaction amount of 100.00 EUR.

For a calculation type of gross, the system calculates a VAT basis of 100.00 EUR. The VAT amount would be 8.00 EUR and the total amount would be 108.00 EUR.

For a calculation type of net, when the customer has the opportunity to pay early and take a discount, the system calculates a VAT basis of 98.00 EUR. The VAT amount would be 7.84 EUR and the total amount would be 107.84 EUR.

Declaration point refers to when you report VAT to the tax authorities—at the accounting date, at invoice time, at delivery, or at the time of payment.

PeopleSoft Receivables maintains two amount fields for recording the two stages of VAT liabilities—an intermediate amount and a final amount. The Intermediate VAT field tracks VAT amounts that are owed by various customers but are not yet ready to be reported to the tax authorities. The Final VAT field contains all VAT that is ready to be reported to the tax authorities by placing it in the VAT transaction table.

For a declaration point of accounting date, invoice, or delivery, the system creates entries to final VAT during pending item entry. For a declaration point of Payment, the system creates entries to intermediate VAT during pending item entry. The default value for the declaration point comes from either the setting for the customer location, customer, and business unit, or the VAT entity. These settings are defined using the VAT Defaults component. The setting for the customer location overrides the setting for the customer; the setting for the customer overrides the setting for the business unit; and the setting for the business unit overrides the setting for the VAT entity.

The system stores pending information in the Pending VAT table (PS_PENDING_VAT). The system stores VAT information for each item in PeopleSoft Receivables on the Item VAT Activity table (PS_ITEM_ACT_VAT). Separate VAT accounting entries are created for each item activity. On each item activity VAT line, the amount is identified as either intermediate VAT or final VAT. When you run the VAT Transaction Loader, it looks for both intermediate and final VAT amounts that have not yet been recorded on the VAT transaction table.

The default declaration date is based on the declaration point, which determines when you must report VAT to the government. The system uses the accounting date, delivery, or invoice date as the default declaration date. For an Accounting Date declaration point, the user cannot override the declaration date during item entry.

For a Payment declaration point, the system handles partial payments in the same manner, regardless of recalculation. The percentage of VAT that the system moves from intermediate status to final status equals the percentage of the item being paid. For example, if the system receives a payment for 50 percent of an item's balance, it moves 50 percent of the VAT amount from intermediate to final.

This table lists the calculation and declaration point combinations that PeopleSoft Receivables supports. Recalculation occurs only when a discount is available: