Paul Ovigele, Ovigele Consulting
Deferred tax is a requirement in certain countries, whereby the Value Added Tax (VAT) is not applied to an invoice until a certain trigger-point, which is usually at the time of payment. This means that when you post a receivables or payables invoice, the tax code that is used in the document (either manually or automatically) is a “deferred” tax code, which will only be transferred to the destination tax code when a payment is made (or received) and the deferred tax program is run. The indicator that a tax code is a deferred tax code can be seen when you go to transaction FTXP and click on the “Properties” button - you should have another tax code in the “Target tax Code” field, which is where the tax amount will be transferred to when you run the deferred tax program. Aside from this, the deferred tax code and VAT tax codes are configured and assigned to G/L accounts in the same way. During the month, payments will be made to vendors and received from customers either automatically (using lockbox, electronic banking, the payment program or other methods) or manually (using transactions F-53 or F-28 for example). For the payments that relate to invoices with deferred tax, the relevant documents will be eligible for deferred tax transfer postings. At the end of the month the deferred tax transaction should be run to transfer the amount from the deferred tax code (and G/L account) and the VAT code (and G/L account).
For those of you who used the old deferred tax program RFUMSV25, you may run into some issues when using the new program RFUMSV50 (which is available with release ECC 6.0 and contains extra functionalities such as the ability to transfer multiple tax lines), especially when you try to process the batch input session. The session will be halted at the document posting screen and the G/L account field will be blank. If this is the case, do not think that there is an error with the new program code or that the deferred tax accounts have not been assigned to the respective tax codes in transaction OB40 (unless of course, they haven’t!). Instead, look at the settings of the deferred tax and VAT general ledger accounts in transaction FS00. The settings which are relevant are as follows:
(1) Deferred tax general ledger account: This needs to be set up as “Open Item managed”. You can set this indicator in the ‘Control data’ tab of transaction FS00. If the account already has a balance then you will need to run transaction FAGL_ACTIVATE_OP.
(2) VAT General ledger account: This needs to have the setting “Only Balance in Local Currency”, and the Tax Indicator of “Output Tax” or “Input Tax” needs to be specified in the ‘Control data’ tab of transaction FS00. If the accounts have already been posted to, you would need to make the balance zero, change the settings and then put the balance back on the account.
When the batch input session has been run correctly, the deferred tax amounts in the general ledger account will be cleared with the amount that is transferred to the VAT account.
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