VAT Calculations for Advance Payments and On-Account Payments

The system calculates VAT for advance payments and on-account payments and creates accounting entries if you enabled VAT for advance payments on the VAT Defaults Setup page for the VAT Entity Registration driver.

You can override the default as needed for each VAT entity and declaration point combination on the VAT Header page when you apply payments.

If the Receivables Update process generates VAT output entries for an advance payment, it performs the following tasks:

• Records the final output VAT.

• Reverses the VAT entries for the advance payment when you apply the advance payment to an item.

If the advance payment is recorded in a foreign currency, the system does not revalue the VAT amount when you apply an item to the payment. When you enter the item, the system converts the remaining VAT amount to the base currency of the item's business unit using the exchange rate for the item.

The system also calculates the correct VAT amount and creates the correct accounting entries when you apply a discount to an advance payment. You must apply the discount when you apply the payment to the item.

This section provides the following examples, which demonstrate different VAT scenarios for creating accounting transactions for advance payments:

• VAT declaration point set to Payment, prepayment applied on payment worksheet.

• VAT declaration point set to Payment, prepayment offset on maintenance worksheet.

• VAT declaration point set to Payment, prepayment applied on direct debit worksheet.

• VAT declaration point set to Payment with VAT rate changes.

• VAT declaration point set to Accounting Date.

• VAT declaration point set to Invoice.

• VAT declaration point set to Delivery.

Note:

The Payment Predictor process (ARPREDCT) processes VAT for prepayments and on-account payments in the same manner as the payment worksheet.