Introduction

Value Added Tax (VAT) is commonly applied to purchases in non-US countries.  In general, VAT must be calculated for every purchase made or customer order received, excluding exports and imports.  (Other occasions when VAT does not need to be paid are discussed later in this section.)  VAT paid on purchases may be recovered from the taxing authority; VAT received on customer invoices must be paid to the vendor or taxing authorities.

VAT processing primarily affects the Accounts Payable, Accounts Receivable, General Ledger, Synchro, and Order Processing modules, where the detail of the company's tax obligations are calculated and recorded.  In Order Processing, the VAT rate is specified on each line of the customer order. 

VAT processing also affects the Purchasing module, since the appropriate VAT rate is specified on each line of the purchase order.  However, most of the VAT calculations for vendor purchases are performed within the Accounts Payable module.  No VAT transactions are posted from Purchasing.

If Order Processing and Purchasing are not installed, the VAT information cannot be specified on the sales order or purchase order lines.  Instead, it is entered when the corresponding customer invoices or vendor invoices are entered into MAC-PAC through Accounts Receivable and Accounts Payable.

The totals for VAT accounts are passed from Accounts Receivable and Accounts Payable to the General Ledger module, along with other accounting totals.

To make the system as flexible as possible in meeting government regulations and adapting to your business environment, VAT processing is determined by several options you set on the Reference File and other master files when first installing the financial modules.  These options can be changed as your tax situation changes.

Note:  This key concept addresses how VAT is handled on customer transactions (through the Order Processing, General Ledger, Synchro, and Accounts Receivable modules) and vendor transactions (through the Purchasing and Accounts Payable modules).  In general, the phrases "within Accounts Receivable" and "for Accounts Receivable" should be interpreted as applying to VAT calculations in Order Processing and Synchro as well as the AR module itself.  Similarly, references to the Accounts Payable module should be interpreted as applying to Purchasing as well.  Any differences in how the modules process VAT information are explicitly stated.

Sequential Numbering of VAT Documents

The Accounts Payable and Accounts Receivable modules provide the capability to sequentially number VAT documents for legal reporting purposes. 

Accounts Payable

In Accounts Payable, sequential numbering is provided through the Fiscal Number and Fiscal Flag fields on the open item.  You determine whether fiscal numbering is automatic, automatic or manual, manual, or not done with the Control Fiscal Number Flag on Reference File category 200 (A/P System Defaults).  The fiscal number is maintained on Reference File category 246 (Next Fiscal Document Number).  For countries that need more control over fiscal numbering, such as having numbers that are sequentially assigned for document type, sector, and date, an external program will be set up on Reference File category M12 for assigning fiscal numbers to documents.

The invoice entry conversation allows you to control and maintain the fiscal number based on the value of the Control Fiscal Number flag as follows:

·     For automatic numbering, only the Fiscal Flag is displayed with a default value of Y (yes).  You may change the flag to specify whether a fiscal number should be assigned to the document.  You can set-up automatic numbering by company/location or company/location/document type on Reference File category 246.

·     For automatic or manual numbering, the fiscal flag is displayed with a default value of Y (yes) and the fiscal number is displayed with a default number from category 246.  You may change both fields.  You can set-up automatic or manual numbering by company/location or company/location/document type on Reference File category 246.

·     For manual numbering, both fields are displayed.  The fiscal flag is displayed with a default value of Y (yes), but you may change the value.  If you leave the fiscal flag set to Y (yes), you must enter a fiscal number for the document. 

·     Neither field is displayed if no fiscal numbering is requested.

Whenever a document is entered using the Open Item Entry or Recording Manual Payment conversations and a record exists for the company/location on Reference File category M12, the external program will be called for the fiscal numbering.  It will format the Fiscal Document Number field on the Accounts Payable Open Item Header file, the Accounts Payable Open Item Audit Trail file, and the General Ledger Accounting Transactions file.  Depending on the Control Fiscal Number flag on Reference File category 200, the following processing will occur if a record exists on Reference File category M12 for the company/location:

·     For automatic or manual numbering and the Fiscal Number field is blank, the program will generate a valid fiscal number when F22 is pressed.  The external numbering program on Reference File category M12 will be called to generate a valid fiscal number.

·     For automatic numbering, the Fiscal Number field will be protected.  The external numbering program on Reference File category M12 will be used to generate a fiscal number when F22 is pressed.

·     For manual numbering, the program will need to validate the Fiscal Number field.  The external numbering program on Reference File category M12 will be called to validate the fiscal number entered. 

The external numbering program passes the following parameters:

Company
Location
Module
Document Type
Sector
Accounting Date
Document Number
Error Code

Reference File category M19 will validate the document sector entered on Reference File category 216, A/P Document Types.

When maintaining an invoice, both fields are displayed, and the fiscal number can be changed if VAT has not been extracted for the document.  If VAT has been extracted, the fields are displayed, but they cannot be changed.  If the fiscal number is changed, all accounting transactions are changed to the new number.

Fiscal numbers are assigned to payment transactions only if VAT is recalculated or if the VAT declaration point is at payment time.  However, the number is assigned during the VAT extract process, not when the transaction is entered.  Fiscal numbering for payments is automatic.

Note:  If you are using the sequential fiscal numbering option, you cannot change any fields on a document that will affect the VAT amount once the VAT has been extracted for the document.

Accounts Receivable and Order Processing

In Accounts Receivable, the fiscal number is assumed to be the document number if the Control Fiscal Number flag on Reference File category 300 (A/R System Defaults) is set to Y (yes).  In this case, it is recommended that you set the Document Numbering flag on category 300 to B (both automatic and manual) to allow the document/fiscal number to be automatically or manually created.  The number is assigned automatically based on the values of Reference File categories 440 (Next Available Document Number).   Category 440 must be defined when the module is first installed; after installation, it cannot be changed.

If a record for the company/location exists on Reference File category M12 and if an external numbering program has been entered, the external numbering program will be used to retrieve the next document number instead of retrieving the record from Reference File category 440.  If the document number is still blank after the call to the external program, the document number will be retrieved from Reference File category 440.  The external numbering program passes the following parameters:

Company
Location
Module
Document Type
Sector
Accounting Date
Document Number
Error Code

Reference File category M19 will validate the document sector entered on Reference File category 329, A/R Document Types.

Fiscal numbers are assigned to payment transactions only if VAT is recalculated or generated as a result of the payment.  However, the number is assigned during the VAT extract process, not when the transaction is entered.  Fiscal numbering for payments is automatic.

Invoices generated from the Order Processing module also use the document number as the fiscal number if the sequential fiscal numbering option is used.  If a record exists on Reference File category M12 for the company/location, then the external numbering program will be called to assign the fiscal number.  In addition, there must be no gaps in numbering.  If a document number is reused, it must not be less than the last number used for the same document number/sector within the same document date. 

The fiscal number will be assigned/validated by checking it against a category which contains the next available number for the sector/accounting date.  This category will be defined locally by each country.  This category will be keyed by company/location/sector/year and will contain the last accounting date and next fiscal number.

Note:  If you are using the sequential fiscal numbering option, you cannot change any fields on a document that will affect the VAT amount once the VAT has been extracted for the document.