VAT settlement in Business Central

The setup decides everything

VAT is calculated from the VAT Posting Setup and the VAT groups you have set up. The combination of a business group on the customer or vendor and a product group on the item or account determines the rate, the calculation type and the accounts the VAT is posted to. If a combination is missing, the posting fails.

Every posting with VAT creates an entry on the VAT Entries page. These are what the VAT statement and the settlement are built on.

The setup is typically done when the system is taken into use, but it should be reviewed when you get new item types, new countries or new customer groups. If a rate is changed, check that the change does not affect documents that are already posted.

VAT statement and VAT return

To see the figures, you use the VAT Statement report, which collects VAT entries according to the setup you have made. For the actual reporting there are the VAT Return and EC Sales List reports. Microsoft writes that VAT reports use the VAT Date field as the primary report date, and that the field is filled with the posting date if you do not use VAT date separately.

In a VAT return you use Suggest Lines, then Release to validate and Submit to send, if the connection to the authority is set up. If you submit in another way, you can choose Mark as Submitted. Learn points out that each Business Central environment is intended for reporting in one country. Whether and how it works for reporting to your tax authority, you need to check in your country's localisation.

The VAT statement itself can also be adjusted. You can create several statements, each with its own lines, so they fit the boxes you report in. Which fields the authority requires, you need to check with your tax authority or accountant.

Settle the VAT

The Calc. and Post VAT Settlement batch job closes open VAT entries and transfers purchase and sales VAT to the VAT settlement account. The purchase VAT account is credited, and the sales VAT account is debited with the amounts for the period. The net amount goes to the settlement account. You can post straight away or print a test report first.

If you specify neither a business nor a product VAT group in the batch job, all groups are included. This is practical, but check with the test report that it is what you want.

After the settlement is posted, the open VAT entries are closed. The amount payable or receivable sits on the settlement account until it is applied through the bank. Reconcile the account once the payment has gone through.

A checklist for each period

A fixed order prevents mistakes:

The checklist can usefully be linked to your deadline calendar, so owner and date are in the same document.

• Post all documents that belong to the period, and reconcile bank and customers/vendors first.
• Run VAT Statement and compare with the VAT general ledger accounts.
• Run the settlement as a test, and read through the differences.
• Submit or report according to your normal procedure.
• Post the settlement, and pay or receive the net amount through the bank.

When posting stops

If a combination is missing in the VAT setup, or an item or customer has the wrong group, Business Central shows the page with error messages. The message points to the setup that is missing, so you can correct it directly. Correct the setup before you post further, so the VAT entries are right when you settle. If you are unsure which rate or group a particular type of sale should have, ask your accountant.

Keep the test report from the settlement together with the reported statement, so you can later show how the amount was calculated.