Tax Tables - an illustrated primer?

R. Victor Klassen rvklassen at gmail.com
Tue Sep 5 20:15:46 EDT 2017


In Canada exempt is different from 0-rated as well.  If you pay HST on goods/materials/services ultimately used to produce zero-rated (not exempt) goods/services, you wind up getting a refund.  If you produce something exempt, you don’t.  But I don’t know that it affects accounting.  Perhaps if you produce both zero-rated and exempt, but I don’t know whether anyone does, then you’d need to figure out how to pro-rate your HST paid, I suppose.   


> On Sep 4, 2017, at 10:40 AM, Maf. King <maf at chilwell.net> wrote:
> 
> 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
> PGP Key fingerprint = 8D68 A91F 733B 2C1F 43B7  2B7C E591 E8E1 0DE7 C542
> 
> 
> 
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