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Dynamics 365 Community / Forums / Microsoft Dynamics AX (Archived) / VAT Chargeable to Proj...
Microsoft Dynamics AX (Archived)

VAT Chargeable to Project Expense

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Posted on by Community Member

Hi there,

May I ask for your expertise on this scenario on Sales Tax?

Value Added Tax (VAT) on VATable purchases and expenses related to a project is chargeable to expense. But there is also a Withholding Tax (WTax) which is computed against the amount (exclusive of VAT) and is recorded upon invoice.

Example:

PO amount (exclusive of VAT)                   1,000

              Input VAT (12%)                                           120  charge to project expense instead of VAT

              Withholding tax (1% of 1,000)                    (100)

              Amount Payable                                         1,020

Accounting Entry:                                                               Dr              Cr

                                Project Expenses                             1,120

                                Withholding Tax                                                 100

                                Accounts Payable                                            1,020

Sales tax is setup as follows:

Tax group                            Tax Codes           Tax Rate

                                VAT & Wtax                        Input VAT                12%

                                                                                    WTax                       1%    

                                 *Price does not include sales tax

Is there a way to make this work in AX 2012 R3?

Many Thanks.

*This post is locked for comments

I have the same question (0)
  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi Aissa Balanon,

    Is the withholding tax a 'real' withholding tax or something that you use for other purposes or that you post on different accounts, such as the VAT, which shall be posted to an expense instead of a BS account?

    What you can test doing is setting up two VAT codes - one with 12% and one with minus 1%. If you assign them to the same sales tax group + item sales tax group you should be able to get the intented posting result.

    Would be great if you could test and let us know the outcome.

    Many thanks and best regards,

    Ludwig

  • Community Member Profile Picture
    Community Member on at

    Hi Ludwig,

    Yes it is real withholding tax.

    That is also what we have done. Creating two tax codes. 1 is for VAT (12%) and the other is WTax (-1%) and assign those in 1 sales tax group.

    The result is it calculates VAT and WTax correctly based on the amount exclusive of 12% VAT. If the 12% VAT is taken as VAT, then there is no problem.

      Amount (Tax base)             1,000

      VAT  (12%)                            120

      Withholding Tax (-1%)        -100

      Amount Payable                 1,020

    But what if the 12% VAT is to be charged to project expense and we are using Project Management and Accounting. The 12% must be reflected as Project Expense instead of VAT.

    This is where we are having a problem because the 12% VAT is reflected as sales tax in AX instead of expense.

    If we are going to assign only -1% WTax in the sales tax group for the vendor transaction then record separately the 12% VAT as expense in a separate journal... it will be hassle for the user to this way because of the volume of transactions.

    Hope there is a way.

    Thank you so much.

  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at

    Hi Aissa Balanon,

    I had a look at this and tested some setups. Based on that I believe that you will need a small adjustment to create the project expense posting because the VAT is always posted in the sales ledger.

    This adjustment can for example consist of a query that filters your sales tax postings with the specific VAT code, fills a new journal that debits your project and credits the VAT ledger account used when you recorded the original transaction.

    Hope this helps.

    Best regards,

    Ludwig

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