Tax Tables - an illustrated primer?

[Maf. King]

Hi Christopher.

UK (and I imagine the rest of the EU) should really have a 0% rate too... VAT 
at 0% is not the same as "exempt from VAT", at least in UK law.  but 
otherwise, looks like good work to me!

cheers,
Maf.



On Monday, 4 September 2017 15:20:57 BST Christopher Lam wrote:
> 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


-- 
Maf. King
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