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We are getting an error when we mark pre-payment for settlement for a vendor along with the invoiced PO.
"Account for sales tax prepayment for vendor account V00501 in posting profile Group does not exist."
We have not faced this issue before. Kindly explain the issue for my better understanding.
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Hi. Sorry for the delay in getting back to you. As you explained, selecting prepayment posts the VAT into a VAT prepayment account and remaining to the vendor account. This conflicts with the input VAT that is charged at the customs / port in case of import since their VAT includes the shipment VAT, VAT for handling etc.
In our system, the PO does not include VAT as it is set to 0% for all foreign vendors and we are currently posting such import (input) VAT manually through GL for such cases. Any vendor VAT is part of the the total PO amount itself as it is not applicable in our country. So for prepayments, we came up with below options:
1) Use Prepayment option
In case of 100% advance payments, we can use the prepayment option with a VAT prepayment ledger account setup to hold the VAT. For foreign vendors where we make advance payments, the VAT is 0% (sales tax group FVAT). So in case of such prepayments, the VAT will be zero and the entire amount will go to the vendor itself and VAT will be posted manually after material receipt through GL as mentioned earlier.
2) Without using prepayment option
The payment via Accounts Payable is done without selecting the prepayment option (even if it is a prepayment). This is the then settled with the purchase invoice amount later. VAT isn't a concern here since it is posted manually as a journal between the Tax Authority and Input VAT. Tax Authority is paid directly from bank.
We are currently using the second option. We had to reverse a few AP payments to repost them without prepayment option selected.
Thanks again for your support Dr. Ludwig.
Hi,
Just wonder whether you have been able to find a solution or workaround for your issue.
Best regards,
Ludwig
[quote user="Ludwig Reinhard"]
Good Morning,
Have you been able to check the different prepayment options available?
Best regards,
Ludwig
Good Morning,
Have you been able to check the different prepayment options available?
Best regards,
Ludwig
Hi,
Can you check the following website where I posted a total of 4 different options how those prepayments can be recorded and what advantages/disadvantages each has. Here is part 1:
https://dynamicsax-fico.com/2016/01/04/vendor-prepayments-1/
Best regards,
Ludwig
Hi. We post prepayments after placing PO, because mostly our vendors / suppliers need advance payments maybe 1 or 2 months before shipment for production / arranging the material. Most of these vendors are overseas. We do not have an issue with it affecting the cash flow forecast.
Hi,
Can you explain why you post a sales tax prepayment in this case?
I have not seen companies posting a prepayment and then later the actual VAT amount directly on the VAT code because this results in the reconciliation issues you mentioned.
The prepayment would be a BS transaction anyway that does not influence your profit.
The 'only' thing affected would be your cash flow forecast that does not differentiate between the net prepayment and the tax prepayment amount.
Best regards,
Ludwig
Thanks for your reply Dr. Ludwig. Yes, we are currently posting the input VAT using the salestaxcode directly. We do not have an issue with that.
My concerns are as follows:
1) Can we use the Input VAT ledger account for prepayment tax as well?
2) If we specify a separate ledger account for prepayment sales tax for vendors and we are posting input VAT based on DHL invoice (as in your case), how can we settle the two? Obviously, the VAT based on DHL invoice would be higher than our prepayment to the vendor.
Hi,
We actually have a similar tax scenario in my home country where we post the AX transaction with a 0% VAT and later on receive an invoice from the importing agency, such as DHL, Fedex, etc. The invoice that we receive let's say from DHL includes the import tax that we post on a separate tax code that has a separate ledger account linked. The 'trick' for posting the tax correctly here is to select the VAT code in the journal line that holds the VAT amount directly. That is, you do not select an item sales tax group and a sales tax group but directly post the transaction with the VAT code selected.
Yet, this kind of tax has nothing to do with the prepayment functionality that you asked further above.
Best regards,
Ludwig
Thank you for your reply magic1949. It's not a new vendor. We have not used prepayments before and encountering this issue for the first time. I discovered it is the issue for the account setup since we have not used this before. But as I mentioned in my earlier reply to Mr. Ludwig, the prepayment tax option is likely to cause conflict with our imports from foreign countries since VAT calculated in the port is different from VAT calculated in AX.
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