Tax on sales/purchases is deducted from amounts in G/L account items and not for amounts in vendor items. For vendors, tax on sales/purchases is input tax and is posted to a tax receivable account. In systems delivered to countries which have no tax on sales/purchases, the Tax code field is suppressed. You can enter output tax in the following ways: You can

• Enter the tax manually
• Have the system calculate the tax

The system posts one item for every tax code.

The following scenarios are possible when entering taxes:

• The invoice contains only one tax code

1. Enter this tax code and the system defaults it in every G/L account item.
2. Enter the entire tax amount for the invoice in the appropriate field.

• The invoice contains several different tax codes/tax rates

1. Leave the defaulted tax code ** in the field.
2. Do not enter any tax amounts on this screen - instead, go to the separate tax screen at the end of the document entry procedure.

• The amount is not tax-relevant

• The document contains tax amounts but they are not explicitly stated

1. Select the Calculate tax field.
2. If the tax rate is clearly specified, enter the appropriate tax code. If it is not, leave the defaulted tax code ** in the field.

The following figure shows the options available for entering a tax code in the individual vendor line items:

When you post a vendor invoice, the system automatically posts the input tax to the tax receivable account.

The following figure illustrates how input tax and a vendor invoice are posted:

Most countries have more than one tax on sales/purchases rate. The tax return must include a separate line for each rate of tax on sales/purchases. For this reason, you must enter a different tax code for each tax rate.

For more information about preparing the tax returns for submission to the authorities, see FI Closing and Reporting.