How to round the VAT in L&CM?

In Logistics and Cash Management, the VAT rounding if performed as a group, by considering for the group constitution the item type and the VAT code.

Note: This method has legal rights in Portugal, Spain, Angola, Mozambique and Cape Verde.

This situation allows the link to Accounting by item type to be performed correctly, avoiding differences in rounding.

In the case of Portugal, this method is in conformity with the determinations in Value Added Tax Code, and it clarifies this specificity in the "Ofício Circulado" no. 53314, of 09/06/1988 of the "Direção de Serviços do IVA" (VAT Services Administration): "(...) The rounding can be performed at once in the amount resulting from the VAT rate and the total taxable value, or several times (for example «row by row») in the amounts resulting from the application of each rate, by rounding up, if the fraction being rounded is equal or superior to 50 cents, and the contrary is the default."

ERP calculation method

The VAT rounding is always performed in the same way, regardless of the document being created. To exemplify this method, we present the following method:

In the VAT column with no rounding, the most exact mathematic values are presented for the VAT calculation:

• Rounding row to row: The column with the VAT with rounding presents a scenario in which the rounding is performed row to row. Even though this method is valid, the calculations present a deviation of 0,05€, that match the roundings. These deviations imply the corresponding handling in the accounting record;
• Group rounding: The column that contains the calculated VAT according to the method used in the ERP presents a calculation of the grouped VAT (in this case, only by item type).

In each group, the rounding differences regarding the most exact value are found. These differences are later reflected on the first row of each group (in the example, 0,02€ have been removed from the VAT of the first row of both groups).

The VAT value sums are performed by group with no roundings and, at the end, we get the total values that do not present any deviations regarding the most exact calculation. This way, the accounting record does not foresee any VAT adjustment types.

There are several ways to perform the VAT rounding and delete the rounding differences. However, the method used by the ERP PRIMAVERA is one with the best range in the support of specific cases, combining the precision of the values to the usability.

Interaction with other systems

This calculation method often generates different values when comparing to the values produced by other information systems, due to the different grouping logics used.

In the case of the ERP PRIMAVERA, the specified model was adopted in all scenarios with the need to perform the VAT values calculation, in the sales, purchase and internal documents.

The VAT and the method calculation responsibility used for roundings is the issuer of the invoice or equivalent document. This way, the system that allow to record purchases must be able to support the values specified in the invoices or equivalent documents issued by the suppliers.

In the case of the ERP PRIMAVERA, this compatibility with the specified values in the supplier documents is performed using the VAT Adjustments features present on the purchase editor.

To make the calculations performed by other systems compatible, the ERP PRIMAVERA allows to record VAT adjustments in the purchases according to the VAT Adjustments features.

VAT rounding in documents

As far as the VAT value rounding in a document is concerned, the app has the following behavior:

1. Sum of the net values for all rows with the same VAT Code;
2. For the total (taxable base value), calculates the VAT values and performs the rounding;
3. If the calculated VAT value is different from the sum of the VAT values for each row belonging to the same VAT Code, the app performs the adjustment (positive or negative) to the VAT value on the first row of that VAT Code, in order for the values to stay the same.

Example:

Let's consider that we have 2 items with the same price:

1. The app calculates the value Net Total regarding the rows with the same VAT Code: Net Total = 2,13 + 2,13 = 4,26
2. Next, it calculates the VAT value and performs the rounding: VAT value = 4,26 x 0,20 = 0,852 VAT value = 0,85
3. Carries out the sum of the VAT values for all rows with the same VAT Code: Rows VAT Sum: 0,43 + 0,43 = 0,86

Since there is a difference between the two VAT values, the app will remove 0,01 to the VAT value of the first row

The result will be the following:

VAT Scheme

The ERP PRIMAVERA supports most of the VAT schemes applicable in the different markets. It is based on this schemes that the taxable base calculation methods, rate application, value specification in documents and other are managed.

The applicable rates in sales are generally applied in three ways:

• On the sales net total (General Scheme);
• On the profit margin (Margin Scheme);
• On the cost.

This way, PRIMAVERA supports the following schemes: