IFS Applications supports different country specific legal requirements through various types of tax
VAT and Sales Tax are not differentiated in IFS. These tax types are referred to as Tax. The user controls basic data setup for retrieval of tax information. Wherever the user setup tax code information, it will be fetched to the transaction.
The system provides functions for tax calculation, tax postings, tax validations and tax reporting. For more complex tax handling, the system provides tax calculation structures to facilitate calculation of multiple taxes with base amount other than net.
Tax liability codes define whether or not customers and suppliers are taxable in sales or purchase scenarios related to our own company. Tax Liabilities are defined per country and are not tied to a specific company. Each tax liability is defined as being one of the following predefined liability types:
Tax Liability codes are user defined but two codes are predefined and valid for all countries, 'TAX' and 'EXEMPT'.
Tax ID Types are used to categorize Tax ID numbers, with a possibility to define a display/print layout for Tax ID Numbers. Tax ID types are defined per country and are not tied to a company. Once a Tax ID type is defined for a country, all Tax ID numbers related to this country need to be accompanied by a tax ID type.
It is possible to set up different tax codes depending on rate, tax type and tax method etc.
IFS supports following tax types:
Tax: Ordinary Tax. This includes both VAT and Sales Tax.
Calculated Tax: For supplier invoices, where 'reverse charge' applies,
i.e. when the customer should account for the tax due according to its own
country's tax rates. When you use Calculated Tax, a tax amount will be
automatically calculated based on the net amount and the tax rate and be posted
as incoming as well as outgoing tax.
For customer sales, Calculated Tax will always be considered zero percent,
irrespective of the rate set. In customer sales, Calculated Tax can be used for
sorting or categorizing different kinds of sales.
Use Tax: For supplier invoices, when buying goods in a non-taxing state
and shipping them into a state that imposes the tax.
No Tax: For sales and purchases not liable for tax. No tax transaction
will be created in the Tax Ledger.
Tax Withhold: For sales and purchases where tax should be withheld.
Tax method decides when tax amount is posted. These are the pre-defined tax
methods;
Invoice Entry: Tax is posted when the invoice is entered.
Final Posting: Tax is posted in connection with the final entry. Only
valid for tax received. Final posting is not valid if the tax type is Use Tax.
Payment: Tax is posted at the time of payment.
No Tax: No tax is posted. This is valid only if the tax type is No Tax.
From this platform it is possible to control the setup of the calculation and adjust to different way of managing taxes with relevant parameters from the transaction source in the applications.
Specify your company's Tax ID numbers for the countries where the company has a tax registration. These Tax ID numbers will be printed on customer order documents and on invoices. You can also, per country, use a Branch to get country specific Customer Invoice number series.
If the company uses an external tax system (Vertex Sales Tax Q Series, Vertex Sales Tax O Series or Avalara) to calculate taxes, this is set up under the external tax system tab.
It is up to each company to set up tax code validations applicable to the tax environment it is operating in. These tax code validations are separated in Customer Tax Validations (sales) and Supplier Tax Validations (procurement).
Customer Tax Validations:
Object level: Decides whether or not it is required to enter tax code information on sales items (sales part, sales object, report code). This will typically be selected for customers operating in an environment where taxes are product related. This means that regardless where customer is situated within the country, taxes are the same.
Address level: Decides whether or not it is required to enter tax code information on customer’s delivery address. Address related tax is typically used by customers operating in an environment where taxes are decided on local/regional level.
Transaction level: Decides whether or not tax code is required on transactions.Transactions refer to customer orders, sales quotations and diffrent kind of customer invoices. information on customer’s delivery address. Address related tax is typically used by customers operating in an environment where taxes are decided on local/regional level.
Supplier Tax Validations:
Object level: Decides whether or not it is required to enter tax code information in Supplier for Purchase Part or Purchase Charge Type. Only applicable if the part or charge type is taxable.
Transaction level: Decides whether or not tax code is required on transactions. Transactions refer to purchase orders and supplier invoices.
Functionality for tax class handling is mainly to facilitate automatic
tax handling when your company is registered for tax in more than one country.
Tax classes are used to hold multiple tax codes per sales item by country. In
each tax class you define tax codes per delivery country, tax liability and
date. You can also, in a tax class, define different tax codes for a country,
valid at different periods of time. For sales items you will be able to set up
either a tax class or a specific tax code.
Note! Tax classes are not intended to be used in countries where multiple tax codes need to be connected to a line item.
Taxes are calculated and stored in Tax Lines connected to order/invoice lines. If only one tax line is connected to an order/invoice line, the tax code is shown also on the order/invoice line.
The purpose with Tax Calculation Structure is to initiate a base to cover tax requirements for customers doing business in countries with complex tax handling. Using a structure allows to calculate multiple taxes with base other than net price and also handle tax on tax calculation.
Tax calculation structures with fixed tax codes and possibility to use the following as base:
For each delivery address, specify the tax liability applicable to the relation between each one of your supplying countries and this specific address. You can also specify Supply Country '*' (asterisk), with the meaning 'any not specifically selected Supply Country'. I.e. the tax liability specified for Supply Country '*' will apply for all not specifically selected Supply Countries.
For liability exempt, specify also tax free tax codes, by delivery type, in order to separate goods, services and tripartite trade in the tax reporting. You can also specify Delivery Type '*' (asterisk), with the meaning 'any not specifically selected Delivery Type'. I.e. the tax free tax code specified for Delivery Type '*' will be used for all not specifically selected Delivery Types but also if the delivery type is missing on the order/invoice line, e.g. not specified on the sales item.
For each document address, specify the customer's Tax ID number(s) to quote. Tax ID Numbers can be specified for each document address by our company ID and Supply Country. If the same Tax ID Number should be quoted regardless of Supply Country, you can specify Supply Country '*' (asterisk) with the meaning 'any not specifically selected Supply Country'.
For each delivery address, specify the tax liability applicable to the relation between each one of your supplying countries and this specific address. You can also specify Supply Country '*' (asterisk), with the meaning 'any not specifically selected Supply Country'. I.e. the tax liability specified for Supply Country '*' will apply for all not specifically selected Supply Countries.
For liability taxable specify in the Taxes sub tab, the tax codes related to the delivery address.
For liability exempt specify in the Tax Exempt Info tab, tax exempt info related to the delivery address. It is also possible to enter tax free tax codes.
For each document address, specify the customer's Tax ID number(s) to quote. Tax ID Numbers can be specified for each document address by our company ID and Supply Country. If the same Tax ID Number should be quoted regardless of Supply Country, you can specify Supply Country '*' (asterisk) with the meaning 'any not specifically selected Supply Country'.
Set up each sales item, i.e. Sales Part, Sales Charge Type, Sales Object and
Report Code as being taxable or non-taxable. Either a tax code or a tax class to
each sales item must be connected.
If the item is taxable, tax rates > 0 should be used and if the item is not
taxable, tax codes with 0% or No Tax codes should be used.
Tax Classes are used to connect multiple tax codes to sales items. In each Tax Class you define tax codes per delivery country, tax liability and date. You can also, in a tax class, define different tax codes for a country, valid at different periods of time.
Set up each sales item, i.e. Sales Part, Sales Charge Type, Sales Object and Report Code as being taxable or non-taxable. It is optional to enter a tax code to the sales item.
How to retrieve a tax code:
When you enter a customer order, the customers' delivery address, the Supply
Country (default from Site) and the company to which the site belongs are used
to find the customers' Tax Liability. The Tax Liability will then control
retrieval of the tax code on each order line.
Object tax – setup
Address tax – setup
When there's no Site involved, e.g. for an Instant Invoice, the same rules
apply except for one thing, the Company Country will default to Supply Country
in the Invoice header.
Note! It is possible to enter tax code on object and/or address. Hence, taxes
can be fetched from both address and object to the same transaction. It is up to
the user to enter the basic data for taxes depending on the tax environment,
i.e. whether the taxes are object related or address related, or a combination.
Taxes will be fetched in to sales transactions based on the object taxability
and customer tax liability type.
Below diagram shows the tax fetching logic for Sales:
*Object : Sales Part, Sales Charge Type and Sales Object
How to retrieve Tax ID Numbers:
The customers' Tax ID Number will be retrieved from the invoiced Customers'
document address. Based on our company ID and the Supply Country, the
appropriate Tax ID Number will be retrieved.
Our own company's Tax ID Number will, when an invoice is created, be retrieved
in the following way:
When creating Collective Invoices, order lines are grouped based on order header info, but also on line delivery country and tax liability type. Taxable order lines with a delivery address country in which our company has a tax registration will therefore be grouped together so that our company's Tax ID no. in the delivery country can be quoted on the invoice.
For all other grouped order lines, the supply country Tax ID no. will be quoted on the invoice.
N/A
For each of your company's delivery addresses, set up the tax codes valid for the address. These tax codes will be used when 'ship-to tax' applies. If the address is not taxable, tax exempt info can be set up.
Specify the tax liability applicable to the relation between your company and the supplier, this is set up on the Supplier/Invoice/Tax Information tab. If tax liability is taxable then define a tax code and if liability is exempt define a tax free tax code. These tax codes with default to supplier invoices.
Specify the tax liability applicable to the relation between your company and the supplier.
For a supplier's delivery address where 'ship-from tax' applies, select the 'Use Supplier Address for Tax' indicator and set up the tax codes valid for the address. This is set up on the Supplier/Address/Delivery Tax Information tab.
Set up each purchase part as being taxable or non-taxable and if taxable, set up a tax code in Supplier for Purchase Part.
If purchase part is taxable, it is possible to enter tax code on the supplier for purchase part. Tax code with tax type Tax, Calculated Tax and No Tax can be entered.
Set up each purchase part as being taxable or non-taxable. If taxable it is optional to set up a tax code in Supplier for Purchase Part.
How to retrieve a tax code:
Object tax – setup
Address tax – setup
Below diagram shows the tax fetching rules for Purchasing
Fetching rules Manual Supplier invoice:
When Tax Liability type is Taxable
How to retrieve tax codes:
Object tax – setup
Address tax – setup
Supplier invoice impact:
Fetching rules Sub Contract:
Fetching Rules Sub Contract Valuation:
How to retrieve tax codes:
Object tax – setup
Address tax – setup
Fetching rules Sales Contract:
Fetching rules Application for Payment(AFP) Items:
How to retrieve a tax code:
If the taxes are not copied from Sales Contracts or Travel Expenses, the taxes will be fetched based on object and address tax setup as below.
Object tax – setup
Address tax – setup
Fetching rules Project Invoice:
Specify the default tax code(s) for each expense code defined on the expense rule using the Right Mouse Button Option “Default Tax Lines...”.
How to retrieve a tax code:
Default tax codes defined on each expense code will be defaulted when using that expense codes in an Expense Sheet or a Travel Request.
Withholding of tax can be done either at invoice entry or at payment.
Income Types are used to indicate that tax should be reported and/or withheld. Income types are defined per country and are therefore not tied to a company. For US 1099 reporting you can define the minimum annual amount of payments to a supplier for which U.S. tax reporting is required.
Tax type Tax Withhold is used to retrieve the tax withholding functionality. For Tax Withhold type tax codes you can define:
Selecting the Use Withholding Amount Table check box means that the percentage specified for the tax code will be ignored. Instead, withholding tax amounts will be calculated at payment, based on the paid amount, using the Withholding Tax Amount Thresholds information. This calculation will consider all payments made to the supplier during a month (an accounting period). Using the Withholding Amount Table is only valid for Supplier Tax Withholding.
The Post Preliminary Tax Withholding indicator should be selected if you want preliminary posting of the withholding tax already at invoice entry even if tax withholding is set up for the tax code to happen at payment. The withholding tax amount will then be re-posted at payment.
Set up the supplier for Income Tax Reporting only or for Reporting and Tax Withholding.
Then also define default information regarding the withholding tax for the supplier:
When a supplier invoice is entered, from the income type specified on each invoice line and the supplier settings, tax withholding will be calculated and stored in Tax Lines, Withholding linked to the invoice line.
If the Post Preliminary Tax Withholding indicator is selected, a 'dummy' payment will be created for the withholding tax where the withholding tax will be posted, either preliminary or finally, depending on if withholding should be done at invoice entry or at payment. If the withholding tax code indicates withholding at payment, the withholding tax will be re-posted to a final withholding tax account when the invoice is paid.
If the Post Preliminary Tax Withholding indicator is not selected, no 'dummy' payment will be created, nor will the withholding tax be posted at invoice entry. The tax withholding will be done when the invoice is paid.
None of the indicators regarding Tax Withholding is applicable for Customer Tax Withholding.
Set up the customer for Tax Withholding.
Then also define default information regarding the withholding tax for the customer:
When Tax Withholding is set up for a customer, a reduced payment amount and a withholding tax amount will be calculated and suggested whenever an invoice is created or paid. The tax withholding will be calculated and stored in Tax Lines, Withholding linked to the invoice line.
Information from each voucher row containing a Tax Account will be transferred to the Tax Ledger when you update the General Ledger. As the voucher row does not hold all information necessary for tax reporting there's the Fetch Tax Ledger Info function which will complete the tax transaction and make it ready for reporting. This function should be executed after each GL update.
Define your Tax Offices and which report should be sent to which office.
Tax books are used to arrange tax transactions into sub ledgers. During the tax reporting process, you can prepare reports for specific tax books.
Create your tax reports based on predefined tax templates.
Create a proposal for a specific Tax Report and a Period/Date range. Print the tax report or create an output file and send it to your Tax Office.
You can create new proposals for not yet reported periods or correction proposals to correct earlier reports.