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Introduction:

VAT Returns are used for reporting VAT liability of a company to the tax authority. After reporting the tax returns, one can trigger a tax payment to clear the liability. One can access the Tax Returns view from the Tax Management work center under Tax Returns.

 

Problem Statement:

In case of some customers, the volume of data to be reported is huge. As seen from their experience, ByDesign system was not able to handle certain cases of large volume, hence we are delivering the functionality to support large volume of data from 1811 release.

Solution Approach:

“Aggregation Tax Returns” is an enhancement to the existing tax return process which will facilitate the customers with large volume of data to leverage the ByDesign system for tax reporting purposes. In this approach, a chain of tax returns will be created for a specified period where each return will pick up number of tax items equal to the ‘batch size’. Every consecutive return accumulates the tax liability from the previous return and this chain continues until all relevant documents have been considered. The last return of the chain represents the total tax liability for the given period and the can be posted for clearing. Below table shows an example:

 

 

 

 

Data Volume: 30 Customer Invoices with a VAT of 10 € each

 

Standard behavior:

One tax return reporting all 30 invoices with a total tax liability of 300 €

New behavior (for specific countries):

Assuming a batch size of 2
Tax Return 1: tax amount 20 €; total tax amount 20 €
Tax Return 2: tax amount 20 €; total tax amount 40 €
Tax Return 3: tax amount 20 €; total tax amount 60 €
So on…
Tax Return 15: tax amount 20 €; total tax amount 300 € à actual payable

 

Current Scope:

As of 1811 release, the process is only enabled for Germany monthly VAT returns (return type: Umsatzsteuer-Voranmeldung) and Netherlands monthly VAT returns (return type: VAT Return), since we encountered customers with large volume of data from these countries as of now. It can be enabled for other countries and declaration types as well, if needed, after analyzing technical feasibility.

 

Aggregation Process in Business ByDesign:

The process for creating a VAT return run remains the same for the end user except for an indicator (Aggregation Run) which needs to be checked. Below is the step by step guide for creating Aggregation VAT Returns (we have taken Germany as an example):

A. Creation of some ‘n’ number of customer invoices, as VAT related business documents, say for Germany:

  1. Go to workcentre view Customer Invoicing-> New Manual Invoice.
  2. Enter account and product related information.
  3. Release it.
  4. Create some more such documents. Let’s say all the documents are having one item each.
  5. Here each Customer invoice is having one item with price 100 EUR and tax 19 EUR.

 

B. Creation of Tax Return Run:

    1. Go to workcentre Tax Management.
    2. Go to workcentre view New Tax Return Run.
    3. Enter some run description.
    4. Enter tax return arrangement ID corresponding to monthly tax return type for Germany (Umsatzsteuer-Voranmeldung).
    5. As soon as you enter this tax return arrangement Id, the Aggregation Run indicator will be editable, set it. From end user’s point of view, this is the only extra step which they have to perform apart from the standard process.
    6. Enter the From and To date for which you want to report the taxes.
    7. Save.
    8. Set to active.
    9. Click Schedule.
    10. Then save and close.
    11. Go to Tax management->VAT Return Runs.
    12. Search for your Run and check tax return ID(s).
    13. The number of tax returns will be determined by the number of documents and the batch size (here,1). In this example, three returns have been created, i.e. 30,31,32. The batch size is kept 1 here for demonstration purpose. As part of the delivered solution, batch size is kept as 10000.
      (Batch size indicates the maximum number of tax lines which will considered in each return of the chain.)


C.
Checking the last return of the chain:

    1. Go to Tax Management workcentre.
    2. Go to VAT Returns workcentre view.
    3. Select the drop down and choose the option “Reported or Completed – Aggregation Tax Returns”.
    4. Here, you can see the last return of the chain which just got created. This is the return which can be ultimately used to clear all the tax liability.
    5. If you open the last return of your chain(here, 32), you can see the Total Tax Amount : 57 EUR, which is actually 19*3, as we had a total of 3 documents with 19 EUR tax each. Thus, this return behaves as if there was only one return reporting full tax liability for that specified period.

D. Navigating to other returns in the chain:

If you open any return in the chain, you can see two labels, ‘Aggregation For’ and ‘Aggregated By’. ‘Aggregation For’ is the return previous to the current return which we have opened. ‘Aggregated By’ is the next return to the current return. You can use the links to these returns for navigation.

 

 E. Form and File Outputs:

  1. If you do preview for this return, you can see the total amount and tax liability in a consolidated form.
  2. Also, for the last return, a file can be generated which can be then submitted to the tax authority. For this,
    a.  Go to Tax Management workcentre.
    b.  Go to VAT Returns workcentre view.
    c.  Select the drop down and choose the option “Reported or Completed – Aggregation Tax Returns”.
    d.  Select your last return, and Click Actions-> Create Aggregated File.e.  A file will get generated which can be seen in Attachments tab of the return.

Correction over Aggregation Process in Business ByDesign:

There can be need of correction to the existing returns, in case there are some new documents for the specified period or some tax liability needs to be added or subtracted. For this as well, we have designed correction process for large volume of data.

Below is the step by step guide for enabling the correction process for large volume of data:

A. Creation of some ‘n’ number of customer invoices, as VAT related business documents, say for Germany, for the same period as above:

  1. Go to workcentre view Customer Invoicing-> New Manual Invoice.
  2. Enter account and product related information.
  3. Release it.
  4. Create some more such documents. Let’s say all the documents are having one item each.
  5. Here each Customer invoice is having one item with price 100 EUR and tax 19 EUR.

These are two new invoices for the same period.

B. Creation of Tax Return Run for correction process:

    1. Go to workcentre Tax Management.
    2. Go to workcentre view New Tax Return Run.
    3. Enter some run description.
    4. Enter tax return arrangement ID corresponding to monthly tax return type for Germany (Umsatzsteuer-Voranmeldung).
    5. As soon as you enter this tax return arrangement Id, the Aggregation Run indicator will be editable, set it. From end user’s point of view, this is the only extra step which they have to perform apart from the standard process.
    6. Set the Correction Run indicator.
    7. Enter the From and To date for which you want to report the taxes.
    8. Save.
    9. Set to active.
    10. Click Schedule.
    11. Then save and close.
    12. Go to Tax management->VAT Return Runs.
    13. Search for your Run and check tax return ID(s).
    14. The number of tax returns will be determined by the number of documents and the batch size (here,1). In this example, two returns have been created, i.e. 33,34. The batch size is kept 1 here for demonstration purpose. As part of the delivered solution, batch size is kept as 10000.
      (Batch size indicates the maximum number of tax lines which will considered in each return of the chain.)

C. Checking the last return of chain:

Now, the last return of the correction chain will be the final last return.

  1. Go to Tax Management workcentre.
  2. Go to VAT Returns workcentre view.
  3. Select the drop down and choose the option “Reported or Completed – Aggregation Tax Returns”.
  4. As you can see, 34 is shown here, which is the last return in the correction chain. This is the return which can be ultimately used to clear all the tax liability.
  5. If you open the last return of your chain(here, 34), you can see the Total Tax Amount : 95 EUR, which is actually 19*5, as now we have a total of 5 documents with 19 EUR tax each. Thus, this return behaves as if there was only one return reporting full tax liability for that specified period.

 

D. Navigating to other returns in the chain:

If you open any return in the chain, you can see two labels, ‘Aggregation For’ and ‘Aggregated By’. ‘Aggregation For’ is the return previous to the current return which we have opened. ‘Aggregated By’ is the next return to the current return. You can use the links to these returns for navigation.

E. Form and File Outputs:
The form can be previewed and the file can be generated in the same manner as mentioned above.

 

BI Reports:

At the end of the whole process, you can have a look at the BI Report : Reported VAT / Sales Tax Items. Here, you can see which document (or more precisely, tax item) is considered in which return, hence traceability will be easy.

  1. Go to workcentre Tax Management.
  2. Go to report : Reported VAT / Sales Tax Items.
  3. Click : Click here to start the report.
  4. Give company, tax due date etc. as selection parameters. The result will give a detailed view.

 

Important highlights:

  • VAT Return Run will show additional parameter – Aggregation Run indicator which would be selectively enabled for a country and declaration type combination.
  • When a volume tax run is scheduled, a chain of tax returns will get automatically created and “released/reported” for the period until all relevant documents are considered.
  • Normally, releasing a tax return would also trigger file generation for a file relevant tax return. This is de-coupled in the aggregation process, the file generation happens via a dedicated action “Create Aggregated File” and this is enabled only for the last return in the chain.
  • The box amounts in the aggregated file will be a total of the respective box taking into consideration all tax returns in the chain.
  • For form relevant returns, the form output of any tax return in the chain will have box amounts which is a consolidation of the current return and all preceding returns in the chain.
  • As part of the delivered solution, batch size is kept as 10000.
    (Batch size indicates the maximum number of tax lines which will considered in each return of the chain.)
  • The last return in the chain will behave as if only one tax return was created and reported to tax authority for that period, in terms of box amounts and total tax liability.

 

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