Tax Setup

Many countries (including Canada and European countries) employ Value Added Taxes (VAT) as important revenue sources. Value added taxes are applied at each level of the manufacturing and other economic processes and the sum of the taxes is reflected in the final price of goods and services. While generally such taxes are applied only by a national government, in federal states there may be a national tax and a provincial or state tax. Canada has a national VAT (Goods and Services Tax – GST) and Canadian provinces have their own VATs (Provincial Sales Tax – PST).

In certain defined circumstances all or part of VAT is recoverable. Accordingly, DATABASICS Expense is able to calculate the portion of a particular expense that represents VAT taxes, calculate the portion of the particular VAT that is recoverable, and provide this information to back-end accounting systems for appropriate action. Expense can perform this function automatically at either one or two levels of tax with no input required from the employee reporting expenses.
In order to generate VAT information, Expense holds Tax Codes to which certain categories or expenses are associated, and Tax Rates for those codes by country, expense type and currency. Additionally, Expense can optionally associate VAT with operating units, departments and locations (fields in the employee profile). For example, if a company had two business units, US and Europe, and set up VAT rates only for the European operating unit, Expense would calculate VAT for European employees incurring European expenses, but would not do so for Americans incurring European expenses.

Basically, a company determines under which circumstances and for which employees and expenses Expense is to calculate VAT. The appropriate expense types, tax codes and tax rates are set up in Expense to reflect the company's situation and processes. If all required criteria have been set up to calculate VAT, meaning that all relationships have been made between users, currencies, expense types, locations, currencies and tax rates, Expense will automatically determine whether a VAT calculation is required, will perform the calculation, and will display the calculation on the user expense reports. VAT data are available in the VAT report in the Admin reports suite.

VAT Set Up

For the VAT functionality to work properly certain setup must have been performed before tax codes are created and tax rates entered:

• City
• Expense Type Setup (Expenses with the City field enabled)
• General System Options (Expense - VAT Rate)