Deferred Tax Account 
Note
The automatic reconciliation function of this account is available only in the following localizations where deferred tax is supported: Austria, Costa Rica, France, Guatemala, Italy, Mexico, South Africa, and Spain.
For reporting purposes, at the end of a company’s financial period, any invoice posted to the accounts within this period must have a corresponding tax liability recorded in the same period.
In the localizations where deferred tax is supported, the tax liability crystallizes only when the payment is due. It is common business practice for there to be a delay between the invoice creation and its associated payment. When the end of the financial period falls within this delay period, the tax value in respect of the invoice is recorded in the deferred tax account to identify the matching tax liability for the period. At the end of the financial period, the transactions that make up the value of the accrued tax liability must be easily auditable.
In SAP Business One, postings to the deferred tax account are automatically reconciled (either fully or partially) when deferred tax is applied in the following scenarios:
Creating an incoming or outgoing payment based on an AR/AP invoice, AR/AP down payment invoice, AR/AP reserve invoice, AR/AP credit memo
The deferred tax amount is posted to the deferred tax account when you create the base document. When you create a full or partial incoming or outgoing payment on the base document, a reversal posting is made to the deferred tax account with a proportionate amount. As a result, the deferred tax account is reconciled in proportion to the paid tax amount.
Creating a credit/debit memo based on an AR/AP invoice, AR/AP down payment invoice
The deferred tax amount is posted to the deferred tax account when you create the base document. When you create a credit/debit memo fully or partially on the base document, a reversal posting is made to the deferred tax account with a proportionate amount. As a result, the deferred tax account is reconciled in proportion to the credited/debited tax amount.
Creating an AR invoice with payment
The deferred tax account is credited and then debited with the deferred tax amount. As a result, the deferred tax account balance is brought to zero, and the postings to this account are fully reconciled.
Manually reconciling an AR/AP invoice, AR/AP down payment invoice, AR/AP reserve invoice with an AR/AP credit memo, incoming or outgoing payment on account
When you manually reconcile an invoice with a credit memo or payment, an internal reconciliation applies for the BP account. At the same time, a separate reconciliation applies automatically for a G/L account, the deferred tax account.
If the payment, or the reconciliation of the BP account is cancelled, the reconciliation of the deferred tax account is also cancelled automatically.
However, in the above scenarios, if the deferred tax account has been involved in a manual reconciliation before the automatic system reconciliation takes place, SAP Business One does not perform the system reconciliation.
Example
You create an A/R invoice for item B01 using deferred tax as follows:
Item No.
Quantity
Unit Price
Total
Tax
Item Cost
B01
5
20
100
14
10
The corresponding journal entry posting is as below:
Account
Debit
Credit
BP Account
Deferred Tax Account
14
Revenue Account
100
Inventory Account
50
Cost of Goods Sold Account
50
You create a partial incoming payment based on the A/R invoice as follows:
Total
Total Payment
Payment Means
114
38
Cash
The corresponding journal entry posting is as below:
Account
Debit
Credit
Cash on Hand
38
BP Account
VAT Payable (Output Tax)
4.67
Deferred Tax Account
4.67
SAP Business One automatically reconciles the postings to the deferred tax account as follows:
Account |
Debit |
Credit |
Reconciliation Amount |
Balance Due |
|---|---|---|---|---|
Deferred Tax Account |
4.67 |
14 |
4.67 |
9.33 |
In this case, the deferred tax account is reconciled in accordance with the paid tax amount. As a result, the deferred tax account balance due is 9.33.