Value Added Tax

 

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Microsoft Dynamics AX 2012 R3

 

Powerful. Agile. Simple.

   Microsoft Dynamics AX is an enterprise resource planning (ERP) solution for midsize and larger organizations that helps people to work effectively, manage change, and compete globally. Microsoft Dynamics AX works like and with familiar Microsoft software and is a solution that automates and streamlines financial, business intelligence, and supply chain processes in a way that can help you with your business.

VAT

Value Added Tax 

Overview

The sales tax framework supports many types of indirect taxes, such as sales tax, value-added tax (VAT), goods and services tax (GST), unit-based fees, and withholding tax. These taxes are calculated and documented during purchase and sales transactions. Periodically, they must be reported and paid to tax authorities.

The following diagram shows the entities of the tax setup and how they are related.

For every sales tax that a company must account for, a sales tax code must be defined. A sales tax code stores the tax rates and calculation rules for the sales tax.

Every sales tax code must be linked to a sales tax settlement period. Sales tax settlement periods define the intervals at which sales tax must be reported and paid to the sales tax authority. Every sales tax settlement period must be assigned to a sales tax authority. A sales tax authority represents the entity that sales tax is reported and paid to. It also defines the layout for the sales tax report. Sales tax authorities can be related to vendor accounts.

Every sales tax code must also be linked to a ledger posting group. A ledger posting group specifies the main accounts that amounts for the sales tax codes will be posted to.

Optional sales tax reporting codes can also be defined. These can be assigned on sales tax codes for the various amount types that are calculated for the sales tax code. The Sales tax payment by code report shows totals per pales tax reporting code for a given sales tax settlement period and interval.

Every transaction that sales tax needs to be calculated and posted for must have a sales tax group and an item sales tax group. Sales tax groups are related to the party (for example, customer or vendor) of the transaction, whereas item sales tax groups are related to the resource (for example, item or procurement category) of the transaction. Tax groups contain a list of tax codes. The tax codes that are present in both the sales tax group and item sales tax group for a transaction are the tax code that apply to that transaction.

The following describes the features for the Microsoft Dynamics AX Sales tax:

Sales tax authorities:

 Sales tax authorities are the entities that tax must be reported and paid to.

Sales tax settlement periods:

Sales tax settlement periods contain information about when and how often sales tax must be reported and paid. They are related to a sales tax authority.

Sales tax reporting codes.

Sales tax reporting codes can be assigned to sales tax codes to report amounts for multiple sales tax codes under one sales tax reporting code.

Sales tax codes.

Sales tax codes contain the tax rates and calculation rules for each sales tax. Sales tax codes are related to a sales tax settlement period and a ledger posting group.

Sales tax groups.

Sales tax groups contain a list of sales codes that apply for the party (customer or vendor) of a transaction. For a given transaction, the intersection of sales tax codes in the sales tax group and the item sales tax group determines the sales tax codes that apply to that transaction.

Item sales tax groups.

Item sales tax groups contain a list of sales codes that apply for the resource (product, service, and so on) of a transaction. For a given transaction, the intersection of sales tax codes in the sales tax group and the item sales tax group determines the sales tax codes that apply to that transaction.

ledger posting groups for sales tax:

Ledger posting groups define the main accounts for recording and paying sales taxes.

Sales tax parameters on the application parameter pages.

Different areas, such as General ledger, Accounts receivable, and Accounts payable, must set up parameters for correct calculation of indirect taxes. Although most of these parameters have default values, they must be modified to fit each company's requirements.

Sales tax on transactions

On every transaction (sales/purchase document lines, journals, and so on), you must enter a sales tax group and an item sales tax group to calculate sales tax. Default groups are specified in master data (for example, customer, vendor, item, and procurement category), but you can manually change the groups on a transaction if you must. Both groups contain a list of sales tax codes, and the intersection of the two lists of sales tax codes determines the list of applicable sales tax codes for the transaction.

On every transaction, you can look up the calculated sales tax by opening the Sales tax transaction page. You can look up the sales tax for a document line or for the whole document. For certain documents (for example, vendor invoice and general journals), you can adjust the calculated sales tax if the original document shows deviant amounts.+

Sales tax settlement and reporting

Sales tax must be reported and paid to tax authorities at regulated intervals (monthly, quarterly, and so on). Microsoft Dynamics for Finance and Operations, Enterprise edition provides functionality that lets you settle tax accounts for the interval and offset the balances to the tax settlement account, as specified in the ledger posting groups. You can access this functionality on the Settle and post sales tax page. You must specify the sales tax settlement period that sales tax should be settled for.

After the sales tax has been paid, the balance on the sales tax settlement account should be balanced against the bank account. If the sales tax authority that is specified on the sales tax settlement period is related to a vendor account, the sales tax balance is posted as an open vendor invoice and can be included in the regular payment proposal.

Microsoft Dynamics AX -Value Added Tax in Saudi Arabia & GCC