Tax Tables - an illustrated primer?

[Christopher Lam]

In case table formatting is lost


On 4 September 2017 at 22:13, Christopher Lam <christopher.lck at gmail.com>
wrote:

> Thank you all
>
> I'd think that the following would nicely summarise how we'd record VAT as
> applied to Commonwealth and Europe. We'd assume that the recording of VAT
> only matters because we need to submit returns periodically for business
> sales and expenses to tax authorities, and this would really not be
> necessary for personal expenses. Numbers from wikipedia. I'm not going to
> attempt India which has different % according to the initial price...
>
> Sample Tax Tables for EC country (e.g. 21% / 6% / 0% for Belgium, 20% / 5%
> / 0% for UK etc) (2017)
>
> *Tax Table*
>
> *Tax Table Entries [Asset/Liability] *
>
> *Percentage or Amount*
>
> Standard VAT on Sales
>
> Liability:VAT:Sales:Standard [L]
>
> 21%
>
> Reduced VAT on Sales
>
> Liability:VAT:Sales:Reduced [L]
>
> 6%
>
> EC Sales
>
> Liability:VAT:Sales:EC [L]
>
> Liability:VAT:Sales:Reversed [L]
>
> 21%
>
> -21%
>
> Standard VAT on Purchases
>
> Liability:VAT:Purchases:Standard [A]
>
> 21%
>
> Reduced VAT on Purchases
>
> Liability:VAT:Purchases:Reduced [A]
>
> 6%
>
>
>
> Sample Tax Table for Australia (2017)
>
> *Tax Table*
>
> *Tax Table Entries [Asset/Liability]*
>
> *Percentage or Amount*
>
> Standard GST on Sales
>
> Liability:GST:Sales:Standard [L]
>
> 10%
>
> GST-free Sales
>
> Liability:GST:Sales:Zero [L]
>
> 0%
>
> Standard GST on Purchases
>
> Liability:GST:Purchases:Standard [A]
>
> 10%
>
> GST-free Purchases
>
> Liability:GST:Purchases:Zero [A]
>
> 0%
>
>
>
> Sample Sales Tax for Chicago, Illinois USA (2017)
>
> *Tax Table*
>
> *Tax Table Entries [Asset/Liability]*
>
> *Percentage or Amount*
>
> Chicago Sales Taxes
>
> Liability:Tax:Sales:State [L]
>
> Liability:Tax:Sales:City [L]
>
> Liability:Tax:Sales:County [L]
>
> Liability:Tax:Sales:Regional [L]
>
> 6.25%
>
> 1.25%
>
> 1.75%
>
> 1%
>
>
>
>
> On 3 September 2017 at 19:40, Geert Janssens <geert.gnucash at kobaltwit.be>
> wrote:
>
>> On zondag 3 september 2017 06:29:48 CEST Christopher Lam wrote:
>> > Hi Users & Devs,
>> >
>> > I'd like to gather data on how Business > Tax Tables are currently being
>> > used by users. Tutorial is rather blank on this; says "set up your tax
>> > tables", "choose name, entries and percentage or amount", and in doubt,
>> > seek an accountant who usually doesn't use gnc.
>> >
>> > From my understanding, Tax Tables are mainly used to *automatically*
>> > calculate various county and state taxes as applied to business invoices
>> > and bills... but it's rather confusing that:
>> > - menu is labelled 'Sales Tax Tables' but the tables are designed for
>> both
>> > sales & purchase taxes
>>
>> True. I have wondered about this also. I assume "Sales Tax" is a standard
>> term
>> in American English ? It helps to consider that the difference between an
>> invoice or a bill is only from which side of the transaction you look at
>> it.
>> The bill you receive from your vendor is an invoice from their point of
>> view.
>> Strictly speaking they are all invoices, but the name bill was adopted in
>> gnucash to make the differentiation easier (I was told it's a common name
>> for
>> invoices you have to pay).
>>
>> > - multiple tax table entries are possible
>> > - each tax table entry allows *multiple* account selection, each with
>> its
>> > own percentage/amount and tax account
>> I don't think this is exactly correct.
>> One can define multiple tax tables. Each tax table can have multiple tax
>> table
>> entries. And each entry has *exactly one* tax account.
>>
>> >
>> > So instead of delving deep into theory of taxes and how they apply,
>> could
>> > users please let me know illustrated examples of how they have set up
>> their
>> > tables in their jurisdiction, and example invoices/bills that apply? I'm
>> > especially keen on an example of an invoice/bill which has multiple
>> > entries, each with its own tax table, and the tax table entry
>> incorporates
>> > multiple tax accounts. (If this makes any sense... because the software
>> > supports it!)
>> >
>> Practical examples in Belgium:
>> Depending on the type of good or service being sold we have different tax
>> (VAT/GST) regimes.
>> On 'luxury goods' (very broad term) we are required to charge 21% VAT
>> On food only 6% VAT is charged
>>
>> That requires me to define two tax tables:
>> One for 21% VAT
>> One for 6% VAT
>>
>> So whenever I buy a 'luxury good', I select the 21% VAT tax table for that
>> good on the bill. When I buy groceries, I select that 6% VAT tax table. I
>> can
>> also shop in a big shopping mall and buy both something considered luxury
>> and
>> some groceries. In that case some lines on the bill will be assigned the
>> 21%
>> VAT tax table and some the 6% one.
>>
>> Note these are very simple tax tables. They both have only one entry
>> setting
>> the percentage and an account to collect the VAT. It makes it easier for
>> my
>> VAT declaration to track the diffent VAT percentages in separate accounts
>> so I
>> have accounts for 6% VAT and 21% VAT.
>>
>> On to a more complicated example: Europe has some special legislation
>> regarding sales across country borders. When I sell something to a German
>> client (being in Belgium myself), I don't have to charge VAT on the
>> invoice,
>> but I do have to declare this VAT to the VAT office in two separate lines:
>> - I have to count the VAT as 21% sales tax (adding it to all the VAT
>> collected
>> on invoices for Belgian customers)
>> - I have to add it to a special entry that counts all the VAT I did not
>> collect because it was an intra-European sale.
>>
>> To collect these numbers I have created an additional tax table, this time
>> with 2 entries:
>> - the first entry is set up for 21% and the normal 21% VAT tax account
>> - the second entry is set up for -21% and a separate account (intra-Euro
>> tax).
>>
>> So whenever I use this tax table two tax splits are created, one to
>> declare
>> the 21% VAT and one to neutralize it again accounting wise. When
>> declaring my
>> taxes I have to reverse the sign of the intra-Euro tax value but that's
>> due to
>> a mismatch in what gnucash generates as report and what the tax office
>> expects
>> as value.
>>
>> There are other uses for tax tables with multiple entries. The most
>> straight-
>> forward is no doubt the concept of multi-layered taxes. Some jurisdictions
>> require to charge different taxes on one invoice: federal, state, county,
>> each
>> with their own percentages. Each of these taxes would have its own tax
>> table
>> entry in the same tax table.
>>
>>
>> > This could be used to populate the documentation with examples to
>> follow.
>> >
>> Good plan :)
>>
>> > Ultimately I'll be keen to create a periodic report which sums all
>> relevant
>> > data, such as for the Australian Tax Office which wants to know GSTs on
>> > sales & purchases every quarter.
>> This is not unique to Australia. The Belgian tax office expects this as
>> well.
>> The exact form of report is what differs from country to country. Since a
>> few
>> years now the Belgian Tax Office requires the user to upload an xml sheet
>> adhering to a certain DTD. Gnucash can't create this (yet).
>>
>> Geert
>>
>
>
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