Create & Post a Payable with a Partial Exemption (PE)

Overview

A VAT registered business might fall into the scope of partial exemption when it has supplies of both a taxable and an exempt nature. These types of businesses will need to undertake calculations to determine how much input tax may be recovered (partial exemption). Typically, a provisional tax rate for partial exemptions is determined at the beginning of the year. When you do a re-determination of the tax rate for actual partial exemptions (true up or true down for the year in arrears), Input VAT can be adjusted by creating a VAT only invoice adjustment. Then, new Tax Groups can be created for partial exemptions based upon the new tax rate.

Partial exemption Tax Groups are included with the pre-configured Tax Groups that are installed with your Accounting Seed VAT Reporting extension package. The pre-configured partial exemption Tax Groups have the deductibility automatically set to 50%, which should be modified to equal your organization’s rate after installation.

From Accounting Home, under Master Data Setup select Tax Groups. Display a partial exemption Tax Group that you want to edit. Then, edit the Tax Rate(s), as necessary. 

Note: Click here to view the above image in full screen. 

Partial exemption Tax Groups will include two Tax Rates: one rate for the Input VAT GL Account and the other for the Non-Deductible VAT Expense GL Account.

Note: Click here to view the above image in full screen. 

In the sample screen below, the partial exemption Tax Group is easily identifiable based upon the “PE” in parentheses at the end of the Tax Group. Additionally, when you select the Tax Group, the description will include the words “partial exemption.” In the Transactions section of the sample screen below, the Input VAT entry and the Non Deductible VAT Expense entry are both included.

Note: Click here to view the above image in full screen. 

Do you want to:

• Create & Post a Payable with a Partial Exemption (PE)
• View the Payable in VAT Reporting

Create & Post a Payable with a Partial Exemption (PE)

1. From Accounting Home, under Cash Out select Payables (Vendor Invoices).
2. From the list view, click New to create a new Payable. The New Payable dialog box displays.
3. Complete the required fields, which display with a red asterisk. 
   1. Posting Status
   2. Payee Reference
   3. Issue Date
4. Select a Vendor or Contact. 
   Important: Payee cannot be an Employee when a VAT Tax Group is selected on a Payable Line. 
   
5. Optional) Complete additional fields.
6. Click Save. The Payable record displays.
7. Scroll down the page to the Payable Lines related list. To add Payable Lines, click Mass Add/Edit Rows.
8. Click Add New Line.
9. (Optional) Click the Lookup icon to search for and select a Product for the line. 
10. Enter the Quantity.
11. Enter the Unit Cost - the cost per unit. This is a required field.
    Important: The Total field is recommended to be read-only on the user interface. The amount that is entered in the Unit Cost field multiplied by the Quantity will determine the Total (Quantity x Unit Cost = Total). The Total field will also include the Tax Amount. If the Quantity field is blank, upon saving, a Quantity of one will auto-populate for the line.
    
    The Total field is controlled by Field Level Security (FLS). Therefore depending upon the permissions granted through a user’s Profile and/or Permission Set(s), the Total field might be editable. However, editing this field directly in the UI is NOT recommended.
    
    
12. Enter or search for an Expense GL Account. 
13. Click the Lookup icon to search for and select a Tax Group for the line. 
    Tip: To view all of the available Purchases Tax Groups for your country, enter the first three letters of the Tax Group. For example for Great Britain, enter “GBP” in the Lookup search textbox and click Go. Otherwise, you can view all of the available Tax Groups from Accounting Home, under Master Data Setup | Tax Groups.
14. (Optional) Add additional lines. 
15. At this point, you can select one of the following: Save & Complete, Save & Post, etc. 
    Note: On a partial exemption, when the record is posted, the Input VAT entry and the Non Deductible VAT Expense entry will be included as part of the transactions.

Note: Posted records can be viewed in Avalara VAT Reporting.

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View the Payable in VAT Reporting

1. To view the Payable in Avalara VAT Reporting, login your account. 
2. From the Transactions menu, select Processed Documents.
   
   
   
   
3. (Optional) Select/enter any or all of the following, and then click Apply. 
   1. Company
   2. Processed After
   3. Processed Before
   4. Filename Contains
   5. Only Show Manual Documents (Only applicable if manual documents were created in Avalara VAT Reporting.)
4. Under File name, click the hyperlink for the Payable that you want to view. 
   Note: In addition to the Invoice Number, each filename includes a date and time stamp. This information is included so that each Payable/Invoice Number can be uniquely identified. 
5. Click the Invoice Number hyperlink.
   
   
   
   
6. Click the Invoice Number hyperlink again to drill-down for viewing line item details. Then, scroll down the page to view each line, as necessary.
   
   
   
   On the sample Payable Line/Invoice Line below, the total VAT amount is included.
   
   
   
   
7. Scroll down the page to display the Additional Document Data.
   Note: For a partial exemption, only the deductible VAT amount is included as part of the VAT Return.
   
   

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