Processing VAT Invoices
Processing AP invoices with Value Added Tax (VAT) requires a slightly different process than other invoices, as VAT tax is not directly expensed.
The following instructions detail how to process VAT invoices in AP.
- When you receive an invoice from the vendor, enter the invoice (in AP Transaction Entry, AP Unapproved Invoice Entry, or AP Recurring Invoices) and post the invoice.
- Post the payment in AP Payment Posting.
- Release retainage using AP
Release Retainage. Note: If you are tracking retainage ITCs separately, the system debits the ITC retainage account ( Debit GL Retg Account field, HQ Tax Codes) and credits the standard ITC account ( Debit GL Account field, HQ Tax Codes) when you pay the release retainage transaction.
- Create an invoice for the taxing authority. This includes two steps:
- Create a journal entry in GL Journal Transaction Entry to debit the ITC amount from the tax liability account ( Credit GL Account field, HQ Tax Codes) and credit the ITC amount to the standard ITC account ( Debit GL Account field, HQ Tax Codes).
- Create an AP expense transaction for the taxing authority. Reference the tax liability account ( Credit GL Account field, HQ Tax Codes) in the GL account field. When you process the transaction, the system debits the tax liability account and credits the expense payable account ( Expense field, AP Company Parameters, Pay Types Discounts/Report Info tab)
- Use AP Payment Posting to post the payment to the taxing authority.