Incorrect VAT Posting Setup

Hello, I have been presented with the following problem… “There are complications that arise at a country boundary because Customs actually impute VAT based on the goods value as determined by the Vendor invoice value and FX rate.” I need help to understand how to setup the VAT posting structure for VAT that is paid on importation of purchases; however, the VAT is added and collected by customs and not by the buy-from vendor. This VAT is added at the country border. At the last minute, I was instructed to change the implementation of the VAT for all vendors that are not in-country, and allow purchase VAT to be included as a seperate invoice directly to a G/L account. So the only VAT that is actually calculated on the vendor invoice is for in-country suppliers. All other VAT is included as a seperate vendor invoice to the GL account just for the VAT amount added at customs. Now we have problems reporting our incoming VAT. Should I have setup the out of country vendors as unrealized VAT? How do I setup the posting so that the VAT is reported under the purchase and not included as a payable to the buy-from vendor? Any advice is greatly apprecitated.

[:o] I am using Navision Attain- Standard DB 3.1 and 3.6 exe’s. This is the localized US version but we have implemented companies for Mexico, UK, and Romania along with the US.

Owen, Which country are implementing in? Is it an EU country? Different countries have different approaches to VAT, but as a rule of thumb, EU countries would like to see you capturing a Reverse Charge VAT for purchases from other EU countries. Basically what you want to do is setup a VAT posting group for the Other EU countries with a VAT posting type Reverse charge VAT. In addition to VAT liability, it will enable you to capture sales and purchases within EU, which are usually needed for the VAT declarations. One wouldn’t expect to have to report VAT for non-EU transactions, but you still need to declare Sales and Purchases in most cases, hence you might want to have a 3rd VAT bus. posting group for non-EU. I experienced some degree of difficulty with 3.6 when implementing in UK. The out of the box posting routines just didn’t want to record VAT without modifications to the posting routines. Apparently 3.1 posts ok thoug(?) Thanks, Tero

Tero, Its a joint venture implementation in Romania. Originally, I based the VAT setup on our UK implemenation and had three VAT posting groups; EU, National, and Export. Our UK office is still migrating over from there old systems and although the VAT for UK has been validated by our accountants, we have not had a full VAT declaration on Navision. The UK addition was to support the RO venture. Anyhow, RO is not an EU country yet (projected 2007) and currently the VAT is somewhat different. From what we now understand, the VAT is applied by a customs broker for everything purchased outside RO. We know there are still problems due to the haste of the implemenation and the time,language, and cultural barriers, but it appears All the VAT posting group (National) seem to work fine. What type of modifications did you need to make for your UK implemenation?

I assume you are refering to the VAT payable on importing goods. If you are importing a lot, set up a deferment account. Customs will then charge you the VAT (rather than the agent) and this VAT is able to be deducted from the VAT due. If the agent is charging you, it is a FULLVAT deduction.

Richard, Yes, it’s import VAT. Thanks, what you said struck a chord and I remember reading about this in the financials guide for conducting business in the EU community. I beleive there was also something in the Navision financial management guide also. Time for more research. Best Regards.

Owen, I had to modify posting routines to get the system posting VAT, basically due the Sales Tax part implemented in US localisation. If I recall correctly, there was an ELSE block missing from from the sales post and some smaller bugs on the purchases side. There is an improvement available, No. 037, of which I used the VAT related stuff. See: For that EU posting group I would set the VAT Posting type to Reverse Charge Vat, and assign a separate account for it. In the UK case that reverse charge will be netted out on the HMCE VAT form. You will need to be able to seggregate Sales and Purchases for all those 3 groups even thoug export won’t create any VAT activity. I hope this hepls, Tero

Tero: Thanks, now that you mention it, I did have to fix a line of code in the sales post so that VAT would be calculated and not sales tax. It was causing inconsistencies. That was one of the first things that I had to do!. Funny how a few months seems so long ago. I think that I’ve found we have two options when it comes to correctly reporting the VAT for RO. I can use reverse charge (my preferrence) or post full vat entries. The difference seems to be the creation of the payable and I am working with my RO peers to figure out the best method. So far, so good.