How To Use Zero Tax And Margin Tax Calculations

Transcription

1 EstiMac / EstiPC How To Use Zero Tax And Margin Tax Calculations Zero Tax Rates In many countries there is a single Tax rate on all Goods, Services and Fees. However, there are times when you may need a Zero Tax Rate of 0%: 1. An Export Project, set at 0%. 2. The Goods or Services are exempt from Tax. 3. Transactions between different States are set at 0%. This is easy to set up. Go to the Totals screen & click on the Tax Rate box. Set the Standard Tax Rate for that Project to 0. Zero Rate Tax will apply to the whole Project. 0% will show on all Estimates, Client Reports & Sales Invoices. 1

2 Zero Tax Rates It may be that only some items in a Project are at 0%. In that case set a Special Rate. Go to the Totals screen & click on the Tax Rate box. Select Special Rates & click on Add. Enter the Zero Rate ID, Rate at 0 & Description. Click on OK & both the Project Tax rates are now shown - Standard Rate & Zero Rate. Fees & Deliveries and Extras can be set at Standard or Zero Rate. 2

3 How To Use After Multiple Tax rates have been set up, an extra Tax column appears to the right of the Grid. All lines will show the Standard Rate until changed. Highlight the line to apply Tax at Zero Rate. Click on the VAT column and the Select VAT Rate screen will appear. Select Zero Rate and click on OK. 0% will appear in the Tax column. The Tax breakdown is shown in the Totals. The Tax Totals are listed below the Net Total on the Client Estimate. This way you can give your Client the correct Total of a Project. 3

4 Margin Scheme - Tax Within The Profit Margin With Zero Rate Tax, 0% is applied to the Net amount of part or all of an entire project. The Margin Scheme is a completely different calculation. The Tax is calculated within the Margin i.e. the Profit. If the Tax rate is 20%, then the Tax = 20/120 x Margin. Normally the Tax is not shown on the Sales Invoice. There are various other conditions attached to using the Margin Scheme. Disclaimer - This Guide Explains the Mathematical Mechanics The following notes are intended to explain the mathematical mechanics of calculating a Margin Tax & the effect on the overall Profit of a Project. Do not use them as guidance on how to comply with the conditions attached to using the Margin Scheme. Government websites explain these requirements very clearly. Legislation is prone to change, so do not rely on these notes to verify current rules. Please be very careful about using this calculation if you are not completely familiar with the relevant VAT, TVA or Sales Tax legislation. Speak to your accountant and get written advice before using this calculation. Please do not consult us. This is the responsibility of your accountant or finance department. The Margin Scheme Basic Conditions & Requirements You can choose to use the Margin Scheme when you sell: Antiques Collectors items. You cannot use the Margin Scheme for any item you bought, for which you were charged VAT. You must keep the correct records, including a Stock Book & copies of Purchase & Sales Invoices. You will have to pay VAT on the Full selling price of each item if you don t meet all the Scheme s requirements. 4

5 How To Calculate The Tax Within A Margin The calculation is relatively simple. However, the Margin Tax payable: 1. is usually not shown to the Client & 2. needs to deducted from the Project overall Profit. An Example will help to explain the calculation. 1. A qualifying item is bought for 1, The qualifying item is sold for 1, The Margin is 300. The Tax is calculated within the Margin, not on top of the Margin. On an 20% Tax rate the calculation is: 20/120 x 300 = 50 or 1/6 x 300 = 50. Not 300 x 20% = 60. The Tax is usually not shown to the Client on the Sales Invoice. Otherwise they can calculate your Profit by: 1. multiplying the Tax of by the formula 120/20 = x 6 =

6 How To Calculate The Tax Within A Margin The best way to calculate the Tax within the Margin is to: 1. Enter the Original Purchase Cost of the item on one line, at Nil Markup. Qty Enter the Margin on the line below in the Unit Price column. Qty Calculate the Tax within the Margin. 4. Enter the Tax as a direct Unit Cost on the Margin line. 5. You then use Grouping to combine the Original Purchase Cost & Margin lines. Use Hidden Group for the two lines. Now there is only one line to Invoice the Client. Calculating the Margin Tax this way Reduces the Profit of the transaction. This is necessary as the Tax is a direct Cost, payable out of Profit. In this example, the Margin of 300 is reduced by the Tax payable 50 = 250 Net Markup. 6

7 How To Set up The Margin Rate Tax To set up the Margin Rate Tax go to the Tax Rate box in the Totals screen. Select Special Rates - Add. Enter the Rate ID & Description. Do Not enter anything in the Rate % box. Click on OK and the Margin Rate is added to the other Tax rates. Click on Edit if you want to change the Description. 7

8 How To Invoice A Margin Rate Line To invoice a Margin line, highlight the line & click on the Tax column. Select Margin. Now click on the Inv. column & use Add To New Invoice. The Invoice makes no reference to the Tax Rate or the Margin. 8