How to Set Up VAT Codes

Overview:

Value-Added Tax (VAT) codes apply the correct tax rates to your sales and purchases, ensuring your records remain accurate and compliant with the Bureau of Internal Revenue (BIR) regulations. 

Input VAT is the tax your business pays on purchases and can be claimed as a credit. Output VAT is the tax you charge on sales and must be reported and remitted to the BIR.

QNE AI Cloud Accounting includes a set of predefined VAT codes. However, to ensure accurate posting and financial reporting, each code must be assigned to the appropriate General Ledger (GL) Posting Account, depending on whether it’s for input or output VAT.

Scenario:

When recording a transaction, you may encounter a system prompt stating that the selected VAT code has no assigned posting account. This means the VAT code must be linked to a valid GL account before the transaction can proceed.

Procedure:

To assign a GL Posting Account to a Tax/VAT code in QNE AI Cloud Accounting, follow these steps:

Step 1: Go to Tax Codes:

• In the navigation pane, select Tax > Tax Codes
  
  

Step 2: Select the VAT Code:

• Select the VAT code you wish to assign a posting account to.
  

Step 3: Assign the posting account:

• Click Edit.
  
  
• Click the Posting Account dropdown field and select the appropriate GL account corresponding to the VAT code.
  
  

Step 4: Save the changes:

• Click Save or Save & Close or Save & New to apply the changes.
  

Note: VAT codes with a 0.00% rate typically do not require a posting account assignment

Application:

Once each VAT code is correctly linked to its designated GL posting account, you can expect greater accuracy and fewer errors in day-to-day operations:

• Transactions can be recorded without prompts or interruptions.
• VAT amounts are automatically posted to the correct Input VAT or Output VAT accounts.
• Reports such as VAT Summary, VAT Relief, and other BIR-required reports will reflect accurate, complete data.

For instance, when you create a Sales Invoice using the SR-SP (Standard Rated – Sales) VAT code, the system posts the VAT to the appropriate Output VAT GL account. This ensures your Output VAT figures are correct and your tax reports are ready for timely, compliant BIR submission