The VAT module for Odoo that has been developed by Zesty Labs team, will help businesses manage their VAT and its related transactions. In the VAT module, we can configure the tax masters, set up the accounts related to VAT, link applicable taxes to the product or product categories level and link applicable taxes to customers and vendors.
In the Accounting menu, we can create the different tax masters that are applicable as per the UAE VAT Framework. In order to do so, we can go to the Invoicing menu and select on the Accounting sub menu, under which an option called Taxes will be present. This is illustrated with the following screenshots:
The tax master can be further segregated by their application type – either as Sales or Purchases Taxes. This can be done by Grouping them based on their application.
As we see in the screenshot that once we group the tax masters by Tax application, the taxes will be grouped as either Purchase or Sales Tax.
In this section, we will see how to configure the VAT for sales. In our tax master, we have created a Tax called Output SR 5%. This is the standard tax output rate that is being charged to the customers in the UAE. The following are the configuration settings for a VAT Output (Sales VAT):
In the screenshot above, we can see the tax name and the type of Tax – in this case it is Sales. The tax rate that has been set here is 5% and the tax account that has been configured will be the “VAT Output” account.
In the tax master, we have created a type of tax called Input SR 5%; which denotes the standard rate of 5% which can be claimed as the VAT input during purchases. We can configure this tax as the follows:
As we can see in the screenshot above, we see that the scope of this tax is Purchase and the account to be configured here is the VAT Output account. In addition, we can have some advanced settings for the VAT Output account. In order to do that, we will click on the Advanced Options tab as shown in the screenshot below:
As shown above; on clicking the Advanced Options tab, we see that we can have some additional configurations to be done in the tax master. The important aspect to be noted here is the Reverse Charge Mechanism (RCM), which is an important factor when it comes to import of goods/services. The fields RCM tax links to the type of tax in tax master which has been created for Reverse Charge scenarios. The accounts to be linked in case of RCM are configured as “RCM Input VAT” and “RCM Output VAT”.
In case of RCM the journal entry will be like below
Chart of Accounts – UAE VAT Related Accounts
In our Chart of Accounts we have setup the accounts that are related to VAT and these accounts are used for setting up the tax masters and their related accounts that will be affected. The VAT accounts can be seen in the Chart of Accounts as follows:
VAT Application on a Product Category Level
We can set taxes for products by linking them to each product category. There are some product categories which have standard tax rates, while others which may be either 0 rated or exempt from tax. In order to set taxes on a category level we will go to the Inventory menu in Odoo:
Under the Inventory menu, we go to the Configurations submenu and click on Product Categories
When we select a product category, we see the fields called Customer Taxes and Sales Taxes. Here we can select the type of tax from the tax masters.
Usually, Customer taxes will be set as Output tax and Vendor Taxes are Input Tax. Under the Tax fields, we see a button called Apply Tax to Products. On clicking this, the stated taxes on the product category will be applied to the related products.
VAT Application on a Product Level
Just like setting the taxes based on categories, we can also configure the taxes based on the product level. We can set the product level taxes on product masters as follows:
In the Product Master, under the Invoicing tab we can see the fields Customer Taxes and Vendor Taxes. These fields can either be set here, or it will fetch from the product category tax settings or from the company tax settings.
VAT Application on Customer/Supplier Level
When we create a customer, the Country field is a mandatory field. Since it is important to know whether the customer is from UAE or if it is an export customer.
If the customer is in UAE, then the state field is also becomes mandatory. Here we can enter the emirate/province. This is a mandatory requirement as per FTA that while we file our VAT returns, we will have to mention the emirate.
In the customer form view, we find a tab called Accounting.
UAE VAT Reports
Analysis report available under Invoicing > Reporting > VAT Analysis menu.
This is a key feature in this module that can be used to analyse your input and out put taxes based on which you can calculate how much you can claim from your input tax.
Excel report available under Invoicing > Reporting > VAT Report menu