VAT recalculation
Use cash-basis VAT to recognize VAT when an invoice is paid. For a foreign-currency invoice, the VAT calculation can also account for exchange-rate differences when the payment is applied.
When you post the invoice, VAT is recorded as unrealized VAT. When you apply and post the payment, the relevant amount moves to the realized VAT account. With Cash Basis selected, foreign-currency applications with an exchange gain or loss also adjust the realized VAT amount using the payment's currency factor.
Set up cash-basis VAT
- [!INCLUDE [open-search](../../includes/open-search.md)], enter General Ledger Setup, and then choose the related link.
- Turn on Unrealized VAT.
- [!INCLUDE [open-search](../../includes/open-search.md)], enter VAT Posting Setup, and then choose the related link.
- For the relevant posting-group combinations, set Unrealized VAT Type to Cash Basis. Specify Sales VAT Account and Sales VAT Unreal. Account.
- On Currencies, verify Realized Gains Acc. and Realized Losses Acc. for each foreign currency you use.
Learn more in Set up unrealized VAT.
Post and review payments
- Post the foreign-currency sales invoice using the configured VAT posting groups.
- Register the customer payment with the appropriate exchange rate for the payment date.
- Apply the payment to the invoice and post it. [!INCLUDE[prod_short](../../includes/prod_short.md)] posts the VAT realization and applicable exchange-rate adjustment automatically.
- Review the resulting VAT and G/L entries and use a VAT statement to report the relevant amounts.