Margin Scheme-Based Bookings
In certain business contexts, margin schemes may apply, depending on your tax laws.
Understanding Tax Margin Schemes
Some jurisdictions allow a number of businesses to pay taxes on profit margins. That is, taxes are applied to the difference between the purchase price and the sale price of certain goods or services.
In the European Union, this includes, for example, travel agents (under Article 308 EU VAT Directive) or merchants of second-hand goods, works of art, or antiques (under Article 315 EU VAT Directive).
Tax Margin Scheme Support in JustOn
To support taxing profit margins, JustOn Billing & Invoice Management has introduced the Margin Scheme revenue recognition rule. Using this rule, JustOn generates separate booking details for the defined margin and for the position total minus the margin.
Implementation
The Margin Scheme recognition rule requires the following invoice line item fields in particular:
| Field | Description |
|---|---|
| Margin | The net or gross margin for the invoice line item, depending on whether it is set as a gross position (Gross Line Item selected). |
| Margin Tax Rate | The tax rate that applies to the margin. The value is taken from the Tax Rate field of the invoice line item. |
| GL Account | The G/L account used for the revenue resulting net amount minus the margin. The value is taken from the G/L Account field of the Assignment Rules - G/L Account custom setting. |
| GL Account 2 | The second G/L account, used for the revenue resulting from the margin amount. The value is taken from the G/L Account 2 field of the Assignment Rules - G/L Account custom setting. |
JustOn applies the Margin Scheme recognition rule if the following conditions are met:
(1) The field Margin of the invoice line item is set.
(2) The field Recognition Rule of the invoice line item is set to Margin Scheme.
If the conditions are not met, JustOn uses the recognition rule Default.
Info
When applying a margin scheme, taxes apply to the margin amount only. For the original price, that is, the rest of the position total, the tax rate is set to 0.
Workflow
Now if enabled and set up accordingly, JustOn Billing & Invoice Management creates three booking details when finalizing the invoice:
- one revenue booking detail for the position total net minus the gross margin with the tax rate set to
0, - a second revenue booking detail for the margin net amount with the tax rate set to
Margin Tax Rate(which is the original tax rate of the invoice line item), -
a tax booking detail for the tax on the margin net amount.
Make sure you have two G/L accounts set in
GL AccountandGL Account 2.
The invoice line item total is split according to the margin, as illustrated in the following examples.
Invoicing net line items and booking net values
Invoice line item:
| Field | Value |
|---|---|
| Pos. Total (net) | 1000 |
| Tax Rate | 0% |
| Margin | 252,10 |
| Margin Tax Rate | 19% |
Applying the Margin Scheme tax rule, this produces the following booking details:
| # | Type | Booking Account | Calculation | Amount | Tax Rate |
|---|---|---|---|---|---|
| 1 | Revenue | G/L Account | 1000 - 252,10 * 1,19 | 700,00 | 0% |
| 2 | Revenue | G/L Account 2 | 252,10 | 252,10 | 19% |
| 3 | Tax | 252,10 * 0,19 | 47,90 | 19% |
Invoicing gross line items and booking gross values
Gross Line Item on the invoice line item is set and the global setting Enable Accounting in Gross Values is enabled:
| Field | Value |
|---|---|
| Pos. Total (net) | 1000 |
| Tax Rate | 0% |
| Margin | 300 |
| Margin Tax Rate | 19% |
Applying the Margin Scheme tax rule, this produces the following booking details:
| # | Type | Booking Account | Calculation | Amount | Tax Rate |
|---|---|---|---|---|---|
| 1 | Revenue | G/L Account | 1000 - 300 | 700,00 | 0% |
| 2 | Revenue | G/L Account 2 | 300 | 300,00 | 19% |
If you use gross values when creating bookkeeping data, the global setting Accounting Gross Taxes on First Month is ignored and the tax is always added to the margin booking detail.