VAT on Imported goods not payable to vendor we purchase goods from

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Dear Experts

Please help me with my given problem;

We purchase goods from Europe on which 5% VAT is applicable on Saudi Customs. As per our delivery terms with company selling us goods we have to get the goods cleared at Saudi customs and for this purpose we are using a clearing agent/a third party vendor.

As per our VAT return we have to show each month purchase value of imports and VAT on them. Lets say imports were valued 100 Euros and VAT was 5 Euro payable at customs. When we applied VAT through receiving inventory+value of invoice through purchases module. It debited purchases with 100 Euros debited VAT recoverable by 5 Euros and credited payable to goods vendor by 105 Euros, but that's where the problem is this 5 Euro VAT is not payable to goods vendor but to clearing agent who paid VAT at customs on our behalf.

How to book VAT on purchases avoiding 5 Euros payable to vendor? About clearing agent we accrue their cost through landed cost option and on receiving their invoice book it by matching it with accruals.

I will really appreciate any workable suggestion.

Thanks in advance.

Ahmad

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Ludwig Reinhard Microsoft Employee on at

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Hi Ahmad,

I'm not familiar with taxes in your country but in my home country we have a comparable regulation.

What we typically do is

1) post the vendor invoice without any vat because there is no car charged from your vendor

2) post the invoice of the agent on a ledger account that ia classified as a sales tax account. In order to get this amount included in your tax statement you have to make this posting by selecting the sales tax code directly. That is you don't specify the sales tax group and item sales tax group but the sales tax code when posting this invoice.

Best regards

Ludwig

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Community Member on at

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Thank You for your answer Ludwig.

Our tax return template makes it compulsory for us to mention Value added tax separately for imports, local purchases etc and also to mention purchases under different heads. If we will not put the VAT on import purchases invoice, system will not give us that info and we have to manually extract that information from concerned GLs.

In addition to this our clearing agent will not only pay 5% VAT on goods on our behalf but also charge us VAT on their services. So we created a new tax id with negative %. lets say VAT on goods is 5%,

Entry will be;

Debit VAT recoverable

Credit Payables

with negative % added

Debit Payable

Credit (clearing account) we put it in tax id.

we will accrue as landed cost exact value of our clearing agent invoice excluding this VAT on goods, and I put the same clearing account in purchase price variance in landed cost ID.

Once I will book the total clearing agent invoice difference between accrued cost and actual value will go to same clearing account to make the balance zero.

Then I will put VAT on clearing agent invoice. This will create right accounting entries.

Regards

Ahmad

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Omar 232 on at

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Dear Mr. Ahmed

can give what's the way

you use it now in you company?

because for us, vendor invoice make regular like before without VAT

for Clearing Agent we make Leger transaction (in description) we put reference vendor invoice number

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ZvikaR 190 on at

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it sounds like you have most of the solution correct....

your scenario is very common, and I have seen in in several VAT environments.

I think it would be better to record the invoice/journal to the custom agent this way:

Credit: vendor (payable) - NET amount.

Debit: VAT recoverable (using special VAT code) - amount of VAT paid on your behalf

Debit: clearing account for landed cost (using "normal" VAT Group/Item VAT Group) - amount of other services charged by the customer agent.

- because you use "special" VAT code (even through it can map into the same "VAT recoverable ledger account), your VAT reports will show that amount separately, and you can report on your import GST separately.

- because you selected VAT Group/Item VAT Group on the second line, the VAT the agent charges you for their services will be calculated correctly, and posted to "regular" VAT recoverable VAT code.

- your landed cost, net amount without VAT will be posted into the clearing account.

- I assume you use AP charge code to apply the amounts form the clearing account to purchase orders.

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