Documentation/ Checking the document header/ VAT, withholding tax and deductions
VAT, withholding tax and deductions
Tax is the part of a document where the odd cases gather. Dijit.app pulls out the whole breakdown, including documents with several rates, exempt transactions and anything with tax withheld.
Document › General tab › the tax block
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The VAT breakdown
For every tax rate on the document, the system records three things:
| Value | What it is |
|---|---|
| Net | The amount that rate is applied to. |
| Rate | The tax rate applied. |
| Amount | What that tax comes to. |
The check tests that the tax amounts add up to the document's tax total. When they do not, the status is Review VAT.
Documents with several rates
An invoice can carry goods at different rates: food at one, drinks at another, services at a third. The system handles it: it records as many breakdown lines as there are rates, each with its own net and its own tax.
That has a consequence for exports: the file with the tax breakdown gives you one row per rate, so an invoice with two rates takes two rows. Some accounting packages insist on one row per invoice; in that case use the documents export or a format built to order.
It is also the commonest reason for the Review VAT status: one rate read wrongly or missing is enough to stop the total agreeing.
Fixing the breakdown and updating the amounts
When the breakdown has not been read properly, you correct it by hand in the tax table. That only fixes the table: the header amounts stay as they were, and the document still does not add up.
That is what Update amounts is for, on the table's totals row. It carries the breakdown's figures up into the header:
| Header field | What it gets |
|---|---|
| Net amount | The breakdown's nets added up. |
| Total VAT | The tax amounts added up. |
| Total surcharges | The surcharges added up, on the documents where that field exists. |
| Total | Net plus VAT plus surcharge plus extra charges, less withholding. |
Before anything changes, a window shows the current and the new value of each field, with the rows that change highlighted. Accept it and the amounts are filled in on screen: you have to save the document to keep them.
The button tells you and changes nothing if the amounts already agree with the breakdown, or if the table is empty, so that correct amounts are never wiped by accident. The overall discount and the carriage do not come into the calculation, because they are already inside the net.
Exempt and intra-community transactions
They go through the same way, except that the tax amount is zero or not there at all:
- Exempt: the net is within scope but no tax is charged.
- Intra-community: the tax is accounted for under the reverse charge, so the supplier does not charge it.
- Imports: the tax is charged at the border and appears on the customs document, not on the overseas supplier's invoice.
On these documents the net and the total are the same. Nothing has been read wrongly.
Withholding tax
The header has fields of its own for both, each with a rate and an amount:
| What | Where you usually see it |
|---|---|
| IRPF | Invoices from self-employed professionals, and rent. |
| Withholding | Any other amount the document holds back. |
The nominal coding also takes a withholding account of its own, separate from the expense one and from the creditor's.
What each does to the total
Tax and withholding do not pull the same way, and mixing them up leads to calling a perfectly good document wrong:
| What | Effect on the total |
|---|---|
| VAT | Adds |
| Equivalence surcharge | Adds |
| IRPF | Subtracts |
| Withholding | Subtracts |
An invoice from a professional with VAT at 21 % and 15 % withheld has a total lower than net plus VAT. That is right.
What to check
- That every rate on the document is there.
- That the nets add up to the total net.
- That withholding has been picked up when the document applies it: this is the one most often missed, because it subtracts, and leaving it out makes the total too high.
- That the surcharge is there, if the buyer is in that scheme.
Particular cases
| Case | How it is handled |
|---|---|
| Tax inside the total, not broken out | Switch on the VAT included calculation. |
| A retailer on the Spanish special scheme | As well as VAT, it carries the equivalence surcharge. |
| A credit note | The tax amounts take the same sign as the net: if the net is negative, so is the tax. |
| Differences of a penny or two | Usually the issuer's rounding, working the tax out line by line. Nothing to correct. |
| A document in another currency | The amounts are recorded as they stand; the application does not convert them. |