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Tax Handling

Invoice Management

Depending on your business requirements and your system environment, JustOn can handle taxes in various ways:

Internal Tax Calculation

By default, JustOn calculates the tax for each invoice line item based on its tax rate. This tax rate can either be determined using tax rules, as outlined below, or be a fix value (set as product tax rate).

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JustOn recommends to use tax rules as the primary approach for defining applicable tax rates. You can, however, combine the two methods. The software first tries to evaluate tax rules, and in case there are no matching rules or none at all, it retrieves the specified product tax rate.

When using JustOn's internal tax calculation with tax rules or a fix tax rate, you can leave the invoice line item field Tax Provider empty. On completion, JustOn sets the value Internal to indicate the origin of the tax calculation on the invoice line item.

Tax Rules for VAT or Sales Tax

If you sell products with different tax rates or operate different markets where variable or multiple tax rates apply, you need rules to determine the correct tax rate for an invoice line item. To this end, JustOn supports tax rules. They provide for tax rate lookups along various combinations of account region, merchant or business entity region, product tax class, product group, etc.

To have JustOn calculate the taxes based on tax rules, you set up the tax rules that meet your business requirements – usually a dedicated tax rule for every applicable tax rate, including one for reverse charge.

With this respect, the following concepts are important:

Tax rules provide for tax rate lookups along various combinations of account region, merchant or business entity region, product tax class, etc.

A tax detail represents an individual tax data set that is determined for a specific combination of region, tax class, etc., and that is included in the tax calculation for an invoice line item. It is always produced if there are multiple tax types available for the context of a business entity, even if only one is finally applied.

Tax rules are applied to invoice line items immediately on creation. JustOn writes the values for the fields Tax Rate, Applied Tax Rule and Tax Code either directly to the invoice line item (like for the VAT) or creates a tax detail for each applicable tax type (like sales tax).

Tax Rules
In international business, which VAT to apply?

Tax on Payment Balances

When registering a payment balance, JustOn uses the internal tax manager to determine the matching tax rule for the balance. This tax rule is then used to calculate the applicable tax on the payment and to fill, accordingly, the balance fields Tax Rate, Tax Amount and Applied Tax Rule.

This facilitates the correct tax handling with pre-payments and deposit invoices.

Be aware of the following specifics:

  • If the fields Tax Amount or Tax Rate are already set when registering the balance, JustOn will skip the tax calculation and will not change the given values.
  • If a balance is split when being assigned to an invoice (see Balance Overpayment), JustOn also splits the tax amount.

Fix Tax Rate

If you sell products that always have the same tax rate, the invoice line item needs the following field to be set for the internal tax calculation to work:

Field Data Type Description Example Value
Product Tax Rate Percent (3,3) Specifies the actual tax rate. 19%
7%

There are several ways to set the value for the Product Tax Rate field:

  • Using data mappings, retrieving the value from virtually any field of any object,
  • Using the ON field mechanism, retrieving the value from a custom field ON_ProductTaxRate of any source object or (for compatibility reasons with older JustOn versions) from the custom field ON_TaxRate of a price book entry,
  • Via a data import.

Tax Calculation - Tax Rounding

Generally, there are two ways to calculate the taxes on an invoice: by row or by column. Applying one or the other method may produce different summarized values.

JustOn calculates the taxes on row base, that is, individually for each invoice line item, and then sums the resulting item totals. This means, each invoice line item fulfills the legal tax regulations, and in addition, JustOn supports multiple tax rates per invoice.

If, however, there is only one tax rate used, a user may be tempted to recalculate the invoice based on column totals. Then the user may get confused because of possible differences in the summarized values.

The following example illustrates the behavior and the possible confusion:

Pos Unit Price Quantity Tax Rate Pos Total (net) Pos Total (tax) Pos Total (gross)
A 0,69 3 19% 2,07 0,39 2,46
B 0,99 4 19% 3,96 0,75 4,71
Sum 6,03 1,14 7,17
Total (net) Total (tax) Grand Total

JustOn first calculates the total net, total tax and total gross values for each invoice line item, rounding them to two decimal places. Then it sums the item totals on the invoice.

Now assume a user recalculates the invoice based on the summarized net values, that is, applying the column-based calculation. This will yield the following result:

Total (net) Tax Rate Total (tax) Grand Total
6,03 19% 1,15 7,18
Formula Total (net) * 0,19 Total (net) + Total (net) * 0,19

Because of the differently applied rounding, the calculated column-based total tax and total gross values now are 1 cent higher than the summarized row-based values of the original invoice.

Some external systems may not be able to handle these tax rounding differences. To support such conflicting scenarios, JustOn implements a special invoice line item of the type Tax Delta.

The tax delta offsets any tax rounding differences. This way, JustOn creates invoices that are calculated correctly on row base and on column base. The tax delta is not displayed, however, on the invoice PDF, the clone invoice page and the invoice line item mass editing page.

This works for invoices that are calculated from net unit prices.

With this feature enabled and following the example above, JustOn creates this invoice:

Pos Unit Price Quantity Pos Total (net)
A 0,69 3 2,07
B 0,99 4 3,96
Subtotal (net) 6,03
Tax (19%) 1,15
Grand Total 7,18

The tax delta feature also supports invoices with multiple tax rates. JustOn groups the items by tax rate and calculates each group separately, as illustrated below:

Pos Unit Price Quantity Tax Rate Pos Total (net)
A1 1,49 1 19% 1,49
A2 2,49 1 19% 2,49
B1 3,49 1 7% 3,49
B2 4,49 1 7% 4,49
Subtotal (net) 11,96
Tax (19%) 0,76
Tax (7%) 0,56
Grand Total 13,28

Adjusting for Tax Rounding Differences

Precalculated Tax

Certain business use cases require to pass through taxes that were precalculated by an external system, like a web shop or an ERP system. When doing so, you turn off JustOn's internal tax calculation.

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The precalculated tax support is available as of JustOn 2.46.

For JustOn to deal with precalculated taxes, the invoice line item needs the following fields to be set:

Field Data Type Description Value
Tax Provider Picklist Specifies the provider that calculates the tax detail.
Precalculated disables the tax calculation.
Precalculated
Tax Rate Percent (3,3) Specifies the tax rate that applies to this invoice line item. With precalculated taxes, this value is passed through for display purposes, but it is not used for calculation. percentage tax rate to be displayed for the invoice line item
19%
Precalculated Tax Currency (16,2) Specifies the absolute tax amount as calculated by a third-party system. precalculated tax amount

There are several ways to set the values for the Tax Rate and Precalculated Tax fields:

  • Using data mappings, retrieving the values from virtually any fields of any objects,
  • Using the ON field mechanism, retrieving the values from custom fields ON_TaxProvider, ON_TaxRate and ON_PrecalculatedTax of any source object,
  • Via a data import.

External Tax Provider

Some countries, like the United States or Canada, have very complex sales tax rules that are difficult to manage. To facilitate corresponding business use cases, JustOn allows for retrieving tax data from an external tax provider.

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The tax data retrieval is available as of JustOn 2.43.

Currently, JustOn supports the AvaTax service from Avalara as external tax provider.

Setting Up Tax Data Retrieval
Setting Up Tax Data Retrieval From AvaTax

Reverse Charge

Certain international business conditions make buyers, rather than suppliers, liable to pay the taxes on transactions. The reverse charge procedure is a common practice for trade within the European Economic Area, including Switzerland. It does not apply, however, to all businesses or products in all associated countries. For an overview, see Person liable to tax on the European Commission website.

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Consult your tax consultant about whether or not your business may use the reverse charge procedure.

When issuing invoices that are subject to reverse charge, suppliers must

  • Bill net prices only
  • Specify the recipient's VAT ID
  • Explicitly state that the reverse charge applies.

You can configure JustOn to display a reverse charge notice for invoices to be sent to buyers in specific countries. This involves

Setting Up Reverse Charge Notice