EU VAT Setup Questions

I have a situation where I have 4 facilities in Europe and 2 in the US. The Facilities in Europe need to calculate VAT on sales. However, I’m not sure if our rules are standard rules or not. For example, the countries in Europe only collect VAT on sales in the same country. So, if France sells to France, it collects VAT. If France sells to Germany, it does not collect VAT. The same is true for all countries. I’ve been able to get the Tax Posting Setups set to where VAT is calculated but I can’t seem to get it to NOT calculate if the sell-to country is different… We have the US version of 3.60A. There is one DB that all 5 countries run out of with seperate companies (the 2 facilities in the US are actually 1 financial entity). Any help would be appreciated. Someone pointing me to the correct documenation would be great as well if it exists. Also, if I need to write code to make this happen, that’s fine. But, a little help pointing in the right direction there would help also.

josh, there are different main cases: Domestic sales, sales to a company within the EU, which has an VAT-ID No., sales to a company within the EU, which has no VAT-ID No., sales to companies which are outside EU. Each of this cases should have its own Gen. Business Posting Group and its own VAT Business Posting Group. If you sell from France to Germany, an the german company has a valid VAT-ID No., in the VAT Posting Setup the VAT Calculation Type must be set to “Reverse Charge VAT”. If the german company has no valid VAT-ID No., you must calculate VAT as if in where a domestic sale. If you sell goods to a company outside EU, the VAT% is 0. /Karl

Hi Josh, the US version of Navision fully supports VAT, so no problem there. Firstly make sure that in THe GL setup, you have ticked the VAT In Use field for the VAT companies. Now be very aware of a major translation bug in NAvision US. Tables 254 thru 257, 290, 323 thru 325 and 381 have been incorrectly translated in the US version as Tax Entry, Tax Statement etc, along with filed etc. THis is done as captions, so it is damn confussing. Basically US sales Tax, and Eurpean VAT use completely different tables from 3.01 on. (In 2.60 and earlier you could not really rn VAT and Sales tax at the same time, and it caused a lot of problems in Canada, so they fixed it). Though you realy shouldnt do it, it may help a lot to trnaslate those table names to VAT again. You will have a lot of fun when your users say they don’t have access to the Tax Entry Table, when really its the VAT entry table they can’t access. Anyway… Basically VAT is something completely differnt to US Sales Tax, so don’t try and compare the two when setting up VAT. Also you may need to setup Intrastat for you Eurpean branches. In terms of guides etc. I suggest you get a copy of the GB version of Navision, or at least the help files, reading the US help will confuse you, since they mix up Sales Tax and VAT from time to time, and it ust leads to confussion. Please DO NOT use the Canadian version as reference for how VAT works, their system is quite different again. Karl has given soem good startiing points below, but you really need to speak with a European accountant to get this set up.

Sorry, I meant Canadian Cronus, obviously US and CA are the same databse.

Hi, What Karl wrote is correct. The only addition I would make is that we diversify the sales/purchases a little further because we need to declare the base amounts as well as the VAT amounts. So basically we have 3 VAT Business PGs: DOMESTIC, FOREIGN and EU, and 4 VAT Product PGs corresponding with our (Dutch) percentages: VAT0, VAT6, VAT12 and VAT19. Alle combinations are set up with Normal VAT except the EU VPPG combinations; they have to have (like Karl already mentioned) Reverse charge VAT. An additional complication in our case is that we have to declare VAT in Germany as well, but it’s in the dutch administration - no separate German company, just a VAT number to declare on. Therefore there is an additional VBPG GERMANY with two VPPGs MWST0 and MWST7 with percentages of 0 and 7 respectively. Sales/purchases from Germany to Germany are handled as normal VAT. Based on this information a separate declaration Form (VAT statement) has been set up for Germany. Hope this helps you a bit. Oh, and another thing mentioned by David is very, very true: have it all checked and approved by the company’s accountant! Regards, Michiel

Thank you for the help, and I appoligize for being new to this topic. I do have some follow up questions: What is the point of the 4 Gen. Prod. Posting Groups? In my case, our French office either charges 19.6% VAT or it doesn’t. If I have 4 Gen. Prod. Posting groups, how do I know which products to assign them to? So, as an example, I have an office in France and 3 customers, 1 in france, 1 in germany and 1 in US. And i have a dozen or so items that I will sell to each country. I need to collect VAT in France - France transactions, I need to Reverse Charge VAT in France - Germany transactions and I need to do no VAT in the France - US transactions. Can someone guide me through the setup of this scenario?

The VAT percentage depends on the type of product. From when I lived in Holland I remember only 2 percentages (6% and 17.5%, and I know the higher one went up to 19%) for food and non-food respectively, and some types of products were VAT exempt. So to account for this in your system, you would have 3 VPPG’s, one for each percentage. Apparently, there is now also a 12% rate, so there’s your 4 VPPG’s. You assign the VPPG to the Item according to the type of Item it is. Now, the customer is in a certain country, So the Customer has a VPG to determine their VAT set up. Obviously, for customers in your own country you would select DOMESTIC, for customers that are in foreign countries within the EU you would select EU, and FOREIGN for countries outside the EU. The combination of the country from and the country to in a certain transaction, combined with the type of product, determines which VAT rules apply.

<message removed, had some connectivity trouble, and doubleposted my reply>

So, your example: Set up your Items: A - hamburger - VPPG = VAT6 B - tool - VPPG = VAT19 Set up your customers: Germany - VBPG = EU US - VBPG = FOREIGN And you’d have another VBPG of DOMESTIC for customers in your own country. Set up your VAT setup: DOMESTIC/VAT6 - vat % = 6, type = normal VAT, plus accts DOMESTIC/VAT19 - vat % = 19, type = normal VAT, plus accounts EU/VAT6 - vat % = 6 - vat calc type = Reverse Charge VAT, plus your accounts EU/VAT19 - vat % = 19 - type = Reverse Charge VAT, plus your accounts FOREIGN/VAT6 - vat % = 0 - type = normal VAT, etc. FOREIGN/VAT19 - vat % = 0, etc. Now when you’re in the French company, and you enter a sales order to a german customer, the VBPG on the order will be EU. The line for the hamburger will calculate a VAT amount of 6% of the amount on the line, and the system will post the VAT according to the accounts you set up in the VAT setup, and will process it with the reverse charge logic. The line for the tool will do that for 19%, etc. Similarly, when you have an order in the French company to a French customer, the system will see it’s a DOMESTIC sale (by way of the VBPG of the French customer) for a VAT6 Item (by way of the VPPG on the Item), and will process the VAT for within France (by way of your VAT Posting Setup).

Thanks, Daniel…and it’s good to hear from you again. As I said earlier, our accouting offices made no mention of multiple rates. They simply said 19.6%. This is probably because we only sell one classification of product. So, along those lines, I created 3 VBPG’s - DOMESTIC, EU and FOREIGN. These were assinged to the customers in the respective countries. France = DOMESTIC, Germany = EU and US = Foreign. Then, I created 1 VPPG - VAT19.6. I then created 3 Posting Setups, i for each VBPG, each using the VAT19.6 VPPG. DOMESTIC/VAT19.6/Normal VAT = 19.6%, EU/VAT19.6/Reverse Charge = 16%, FOREGIN/VAT19.6/Normal VAT = 0%. All setups direct all activity to G/L Account 99995 just so I can isolate all transactions for testing. I posted a sales invoice for each country and 1 purchase invoice for the domestic (bought from a domestic supplier). The Domestic Transaction seemed to work correctly. I had a transaction for 19.6% of the order total in account 99995. However, the other transactions produced no activity in account 99995. I expected that for the Foreign customer, but not for the EU customer. Also, the purchase didn’t produce an VAT activity either. What did I do wrong?

Josh, on the topic of tax rates. You should create groups for all the possible VAT rates, even if you don’t use them. The reason is that on VAT statements, authorities will want to see those groups with zero reveue. Even though you will probably not use the reports, it ust makes life easier with AUditors when they see every thing there. On the topic of 0% VAT, many countries differentiate between NO VAT and Zero VAT, so you may also need a 0% VAT, again this is so that you cna show the sales revenue that did not acrue VAT. And again, don’t forget Intrastat, and purchase VAT on inter country sales.

Good to see you’re using the newsgroups Josh. Don’t forget about me when you guys do the Milan office, I know this great restaurant there [8D]. I don’t know about the ‘missing’ entries without testing it myself. I’d expect an entry for the VAT amount and one for the reverse charges. I don’t know if you have to run a ‘post VAT to GL’ routine or something like that. Maybe Navision saw the two entries cancel eachother out and didn’t post any, although that’s unlikely. Are you testing this on your own system or a Cronus database?

Hi All, @ Josh: I concur with David about setting up all possible combinations. He’s correct about reporting, but also consider your Purchases and Payables - you’re likely to procure more than just the goods/services you need for your business. I bet food and staionary is in the low tariff in France as well as it is in Holland. Furthermore, there is indeed an important difference between VAT EXEMPT and VAT with a percentage of 0. When goods/services are exempt of VAT, the company selling/providing them IS NOT allowed to recuperate VAT paid on purchases (like general practitioners, insurance brokers or the government itself!). If the goods/services have a tariff of 0%, such recuperation IS allowed (goods imported/exported or destined to be loaded aboard ships and aircraft leaving for foreign destinations). For the setup of the tariffs in Navision however, this is rather academic. @Daniel: the 12% in Holland tariff is rather old (it has been in existence almost ever since the VAT Acts were passed - albeit with different percentages) but has limited scope. It is only used for private use of company posessions like cars and such. The tariff is never used for direct invoicing, only indirectly for posting to the correct G/L accounts for VAT declarations. Furthermore, the Intrastat declaration must reconcile with the intra-EU sales/purchases like David said. Regards, Michiel