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Quantum VS Help: System Administration |
Quantum VS uses various records to maintain and apply the correct VAT rate on sales documents.
Note: VAT applies to European Union Member States or any other country/territory within an agreed European Single Market VAT Area.
This section covers:
The system automatically determines the VAT rate payable by the customer based on the country of the seller and buyer. The Country settings on the Branch and Customer/Customer Site records determine which VAT regime applies. Additional records determine the actual VAT payable by the customer.
The following sale types are possible. If the customer's delivery address is:
in the same country as the selling Branch: this is an internal sale.
in a different country to the selling Branch, outside the EU: this is an export sale.
in a different country to the selling Branch, within the EU: different circumstances apply, depending on whether (a) the customer is registered for VAT and (b) whether a Member Country VAT Record (with saved VAT Prefix and Number) exists for the customer's country.
The following examples show how the system determines the VAT payable by the customer based on the seller and buyer's country. For these examples the seller (i.e. the selling Branch of the Quantum VS-using company) is in the UK.
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Is customer VAT-registered? |
Is there a Member Country VAT Record (with saved VAT Prefix and Number) for the customer's country? |
VAT rate customer is charged |
Quantum VS records determining VAT rate payable by customer |
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1. UK seller to UK customer (internal sales)
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N/A |
N/A |
UK VAT rates |
VAT Code on Product record determines VAT rate applied when Product line is added to sales document; Sales Ledger – VAT tab holds available rates for each VAT Code.
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2. UK seller to EU customer (not in UK) - a, b and c
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Yes |
N/A |
UK VAT - zero-rated |
'Zero rate' code defined in the Sales Ledger – VAT tab. Other VAT codes are overridden.
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No |
No |
UK VAT rates
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If there is no Member Country VAT Record (with saved VAT Prefix and Number) for the customer's country, the system processes the transaction as an internal sale. Hence:
VAT Code on Product record determines VAT rate applied when Product line is added to sales document; Sales Ledger – VAT tab holds available rates for each VAT Code.
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No |
Yes |
EU country VAT rates |
If there is a Member Country VAT Record (with saved VAT Prefix and Number) for the customer's country, the associated Product By Member Country Record for the product being purchased gives the relevant VAT code; the VAT rate comes from the european_union_vat_rates Table File.
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3. UK seller to non-EU customer (export sales)
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N/A |
N/A |
UK export rate - zero-rated
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'Zero rate' code defined in the Sales Ledger – VAT tab. Other VAT codes are overridden.
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The VAT tab of the Sales Ledger is used to define up to six VAT bands, descriptions and rates for use in your system. Typically, band 1 is used for the 'standard' VAT rate in your country of operation, while other bands may be used for setting up other rates. See Sales Ledger: VAT Record.
A product's VAT code is defined in the VAT Code field of the Product record. Any of the VAT codes set up in the Sales Ledger: VAT Record may be applied. See Recording General Product Details.
For internal sales (e.g. 1 above) where the seller and customer are in the same EU country, the VAT Code held in the Product record, and the VAT Rate associated with that VAT Code as defined in the Sales Ledger – VAT tab, determine the amount of VAT incurred by the customer.
Example: you - the seller - are in the UK and your 'band 1' VAT Code (as defined in the Sales Ledger – VAT tab) is the standard rate of 20 per cent. The VAT code for 'Acme Spanner' (as defined on its Product record) is VAT Code 1. Therefore, internal customers will incur VAT of 20 per cent when buying 'Acme Spanner'.
Note: VAT is due on the movement of goods, not on the invoice. So if the selling Branch is in the UK and the buyer is defined as being in a foreign country, but the delivery address is the UK, this is classed as an internal sale and UK VAT will apply.
Sales where the customer is in a different EU country, but the customer is not VAT-registered and there is no existing Member Country VAT record for that country featuring a VAT prefix and number (e.g. 2b above), are also classed as an internal sale.
Sales where the customer is in a different EU country and is VAT-registered (e.g. 2a above) are zero-rated for VAT.
Export sales (e.g. 3 above), where the seller is in an EU country but the customer is outside the EU, are also zero-rated.
When trading with customers in a different EU country who are not VAT-registered (e.g. 2c above), Member Country VAT Records and Product By Member Country Records are used for determining the VAT rate payable by the customer in their country. Member Country VAT Records hold the VAT identification number for your company in that country. Product By Member Country Records hold the VAT code for the products you sell in that country. So if you are selling to a non-VAT-registered customer in another EU country and there is an existing Member Country VAT record for that country holding your VAT prefix and number, the associated Product By Member Country Record for the product being purchased gives the relevant VAT code, while the actual VAT rate comes from the european_union_vat_rates Table File.
Example: you - the seller - are in the UK and you are selling 'Acme Spanner' to a customer in a different EU country - the Republic of Ireland. A Member Country VAT Record - holding a valid VAT prefix and your VAT number for trading in that country - exists for the Republic of Ireland. A Product By Member Country record exists for the Republic of Ireland and 'Acme Spanner', determining that its VAT Code is the standard rate for the Republic of Ireland. The european_union_vat_rates Table File determines that the standard rate for the Republic of Ireland is 23 per cent. Hence, your Irish customer pays VAT - in their local currency - of 23 per cent when they buy 'Acme Spanner' from you (i.e. a selling Branch in the UK).
Provided the appropriate records are in place to suit your trading arrangements, the system will automatically determine the VAT rate payable by the customer in their country. The following summarises the VAT-related records you will need to set up in Quantum VS:
Note: The examples above show how these records are used by the system in determining VAT rates payable by the customer.
The VAT tab of the Sales Ledger is used to define up to six VAT bands, descriptions and rates for use in your system. Typically, band 1 is used for the 'standard' VAT rate in your country of operation, while other bands may be used for setting up other rates. See Sales Ledger: VAT Record.
A product's VAT code is defined in the VAT Code field of the Product record. Any of the VAT rates set up in the Sales Ledger: VAT Record may be applied. See Recording General Product Details.
The system automatically determines the currency and VAT rate payable by the customer based on the country of the seller and buyer. To facilitate this you will need to specify the Country in the following records:
Branch: See Adding Branch General Details
Customer: See Entering Customer General Details
Customer Site: See Creating A New Customer Site Record
You will also need to specify the Currency Code in the following records:
Customer: See Entering Customer General Details
Note: The Currency Code on Customer Sites defaults to the Currency Code defined in the parent Customer record.
When setting up Quantum VS you will define your default:
Country Code (i.e. 'home' country of operation) - in the Default Country field in the Price Book General - Miscellaneous tab; and
Currency Code - in the Default Currency field in the Price Book General - Miscellaneous tab.
The following record types are required when trading with customers in a different EU country who are not VAT-registered:
If you are VAT registered in another EU country because you sell to customers in that country, you will need to create a Member Country VAT Record which holds your VAT ID number in the EU country you are trading with. See Creating A Member Country VAT Record.
When selling to non-VAT registered customers in a different EU country (for which a Member Country VAT Record exists with your VAT ID number) you will need to create Product By Member Country Records to assign the correct VAT rate on products being sold in the EU country you are trading with. See Creating A Product By Member Country Record.
The following Table Files hold values related to VAT (and multi-currency). These are updated automatically with each release of Quantum VS and no manual user maintenance is required:
european_union_constitution
european_union_vat_rates
european_union_vat_descs
iso_3166_1_alpha2_country_code
iso_3166_country_code_types
iso_4217_currency_code
vat_format
vat_prefix
country_special_territory
The Sales Clerk may optionally view and amend VAT rates for Sales Orders and lines in the following windows:
Add Manual Price Line (see Manual Lines And Sales Documents)
Add Special Product (see Special Lines And Sales Documents)
Add Delivery Charge (see Adding Carriage Charges And Premium Delivery Charges)
For example, the VAT rate of the item 'Acme Spanner' (as defined on its Product record) is VAT Code 1. Therefore, internal customers will, by default, incur VAT of 20 per cent when buying 'Acme Spanner'. As an inducement to a customer the Sales Clerk might amend the VAT rate payable by the customer for 'Acme Spanner' - for the current order only - from the current applicable rate of 20 per cent to another, lower, rate.
The new multi-currency VAT system - with the addition of Member Country VAT Records and Product By Member Country Records - was introduced in Quantum VS 9.6.
In pre-Quantum VS 9.6 releases:
A Customer Account Sales Order is defined as an 'export' order if it is for an 'export' Customer (i.e. the Export field in the Customer record - General Details tab is checked) and the Export field is checked in the Properties area - Document panel of the Sales Order. An 'export' Sales Order uses the 'Export' VAT Code specified in the Sales Ledger - VAT Record, set as 0 per cent.
For 'export' customers (using the zero-rated 'Export' VAT Code specified in the Sales Ledger - VAT Record) VAT is applied at 0 per cent on all Sales Orders and the Product VAT code is ignored.
In Quantum VS 9.6 onwards, the Export field has been removed from Customer records (General Details tab) and Sales Orders (Properties area - Document panel) and the customer's Country determines which VAT regime applies, as described above. An 'export' order is one in which the seller is in an EU country and the buyer is in any non-EU country, and will be zero-rated.
Two new record types - Member Country VAT Records and Product By Member Country Records - are required when trading with customers in a different EU country who are not VAT-registered. The examples above show how these records are used in determining the VAT rate payable by the customer.
The existing Multi-Currency features of Quantum VS enable sales documents to display the currency used by the customer, at the most recently-set exchange rate, when dealing with customers who trade in a currency different to the home/system currency.
Any Quantum VS installation where there are both Customers and Uninvoiced Sales Orders flagged for export will need to undertake the following steps for conversion to a full multi-currency sales environment:
Uncheck the Export field on existing Customer records.
Uncheck the Export field on existing Uninvoiced Sales Orders.
Ensure a valid Country is defined in your Branch, Customer and Customer Site records.
Ensure your 'home' country of operation is defined in the Default Country field, in the Price Book General - Miscellaneous tab.
Ensure a valid Currency Code is defined in your Customer records. See Entering Customer General Details.
Ensure your 'home' currency is defined in the Default Currency field in the Price Book General - Miscellaneous tab.
Ensure system records are configured for Multi-Currency Selling, so that orders raised for Credit Account Customers outside your Default Country use the appropriate currency. This includes populating the currency-related Table Files CURR and SCUR with appropriate currency values, enabling certain optional Enhancements and system settings and setting. See Setting Up Multi-Currency Selling.
If you will be trading with customers in a different EU country who are not VAT-registered, you will need to:
Create Member Country VAT Records which hold your VAT ID number in the EU country you are trading with. See Creating A Member Country VAT Record.
Create Product By Member Country Records to assign the correct VAT rate on Products being sold in the EU country you are trading with. See Creating A Product By Member Country Record.