In a deferred tax system, you report collected or paid tax according to the date the tax is actually paid, and not according to the date the marketing document is created. If the document has been created using a foreign currency, it is likely that the exchange rates differ on these dates.
If tax is reported in the local currency at the exchange rate applied when the marketing document is settled, and not at the exchange rate applied when the document was created, the resulting differences need to be accounted for.
Hence the amount of VAT or any other deferred tax calculated in the original document is only for provisional purposes. It is not considered as the basis for the amount of tax to be paid or reported to the local tax authorities.
Currency exchange rate differences in documents where deferred tax is applied can be posted to a new G/L account.
Note
The documents covered by the deferred tax system are: A/R and A/P invoices, A/R and A/P credit memos, A/R and A/P down payment invoices. Exchange rate differences are not liable to tax.
The deferred tax method must be in use in SAP Business One and the apply exchange rate on deferred tax function set up for your company.
An A/R invoice was created in US dollars with an exchange rate of 10 Mexican pesos per US dollar. This is for one transaction row item of 1000 US dollars and VAT of 15% deferred (150 US dollars is the tax amount liable). The G/L account postings are as follows on the date the A/R invoice is created:
USD (Foreign Currency) |
Mexican Pesos (Local Currency) |
|||
---|---|---|---|---|
Customer |
1150 |
11500 |
||
A/R |
1000 |
10000 |
||
VAT Deferred |
150 |
1500 |
When the A/R invoice is paid, the exchange rate is 11 Mexican pesos per US dollar.
If the apply exchange rate on deferred tax function is not set up for your company, the G/L account postings are as follows:
USD (Foreign Currency) |
Mexican Pesos (Local Currency) |
|||
---|---|---|---|---|
Cash |
1150 |
12650 |
||
Customer |
1150 |
11500 |
||
VAT Deferred |
150 |
1500 |
||
VAT Payable |
150 |
1500 |
||
Exchange Rate Gain/Loss |
1150 |
If the apply exchange rate on deferred tax function is set up for your company, the G/L account postings are as follows:
USD (Foreign Currency) |
Mexican Pesos (Local Currency) |
|||
---|---|---|---|---|
Cash |
1150 |
12650 |
||
Customer |
1150 |
11500 |
||
VAT Deferred |
150 |
1500 |
||
VAT Payable |
150 |
1650 |
||
Exchange Rate Gain/Loss |
1150 |
|||
Tax Exchange Rate Gain/Loss |
150 |