Explains how to record VAT (Value Added Tax) for expenses. This can be done in three ways:
- Manual - which you manually enter the tax amount based on actuals such as the printed receipt
- Company Tax (Default) - which is set by the company at a fixed rate for example: meals, parking or mileage etc.
- Location Tax - you may be working/traveling on a project outside your location, and tax varies from location to location or from country to country. Here tax is calculated based on location such as VAT at 20% in the UK
Even when taxes are calculated automatically you can manually over-rule them. This is particularly important in situations where only part of your expense is subject to VAT and part of the expense is tax-free.
VAT is important to record on expenses because companies with a tax presence or base in that country can often reclaim the VAT paid on expenses and offset it against VAT charged on sales. Employee will still get reimbursed for the full amount and you can elect in billing whether to remove the input VAT or not.
Manually Applied Tax
To enter VAT manually on your expense add an item or import a bank card transaction into your expense claim as normal. Click on the pencil next to your expense item as shown above to open expense item details. In the expense item details click on the tax calculator icon as highlighted above.
- Once you have clicked on the tax calculator icon you can enter the amount of VAT or tax on your expense
- You can also adjust what is called the "tax base" or the base amount used to calculate VAT. This is used in situations where only part of a hotel receipt or grocery purchase for example is subject to VAT
- You can optionally record the vendor's VAT code or reference transaction number. This is useful when it comes to end of tax year VAT reporting.
Company Defined Tax
If your iBE support consultant set up a default tax rate in your company code tax settings then expense types coded to use a specific tax code (such as SVAT or standard rate VAT for example) will automatically calculate VAT at this rate. VAT is calculated on the entire value of the expense item. You can manually adjust the resulting tax calculation as highlighted above in a similar way to how you enter VAT manually.
VAT is an input tax and is therefore inclusive in its calculation. For example if an expense item for £100 is entered with VAT at 20% the automatically calculated VAT is not £20. £20 VAT would apply to an expense item for £120 since £100 +£20 = £120. 20% VAT on £100 is calculated as £16.67 or 100 - (100 / 1.2)
Location Based Tax
Standard VAT tax rates for key jurisdictions like UK and Europe are automatically updated in the iBE system. Depending on the location of either the expense (if a location was entered) or your company (if no location was entered), as well as the tax code applied to your expense type, the appropriate VAT rate is selected and tax amount calculated similar to company defined tax mentioned above. You enter the location for your expense item as highlighted above.