Country Specific VAT
Table Of Contents
Country Specific VAT allows Khaos Control to automatically apply tax rates based on the country being invoiced and delivered to. This is particularly useful for businesses that are registered for VAT in multiple countries or need to account for taxes outside the UK.
When configured correctly, sales invoices can automatically use the tax rates assigned to the customer's country, ensuring the correct VAT treatment is applied and reported.
Using Country Specific VAT also allows VAT transactions to be recorded against the appropriate country's tax return rather than the UK VAT return.
How Country Specific VAT Works
Country-specific tax rates are configured against individual countries and then assigned to stock types.
When an invoice is raised, Khaos Control checks:
- The customer's invoice country.
- The customer's delivery country.
- The country-specific tax rates configured for the stock items being sold.
Tax Rate Priority
Khaos Control uses the following hierarchy when selecting a VAT rate:
- Stock Item VAT Rate
- Stock Type VAT Rate
- Default Tax Rate
If a country-specific tax rate is assigned directly to a stock item, it will always take precedence over the tax rate assigned to the stock type.
Country-specific VAT rates can also be applied to delivery charges where required.
Important Notes
SP Ledger Postings
The SP Ledger posting process links the selected tax rate to the associated tax country.
This means that transactions posted using a country-specific VAT rate are included in the VAT return for that country.
Example
If a business imports goods into the Republic of Ireland and pays Irish Import VAT:
- Select the Irish tax rate on the SP Ledger entry.
- Enter the VAT amount.
- Post the transaction.
The VAT will then appear on the Republic of Ireland tax return when filtering the Tax_Register_Tab" target="_blank" rel="noopener noreferrer">[ Accounts | Tax ] screen by country.
VAT Nominal Posting
Country-specific VAT is still recorded against the system's Tax on Sales nominal account.
Address Requirements
Country-specific VAT rates are only applied automatically when:
- The invoice address and delivery address are in the same country.
- VAT rates have been configured for that country.
If the invoice and delivery countries differ, the default VAT handling rules will apply.
UK VAT Return Reporting
Enhancements have been made to ensure country-specific VAT sales can contribute to the EU sales figures reported on the UK VAT Return.
This affects the statistical values reported in:
- Box 6
- Box 8
For more information, see 018897: UK VAT EU Sales Figures Box 6 and Box 8.
Important Notes
- These values do not affect VAT payable calculations in Box 5.
- They only affect statistical EU sales reporting.
- The changes are not retrospective and only apply to new transactions.
- From version 8.188 onwards, customer information is displayed on the related transactions.
- From version 8.189 onwards, businesses can disable this feature for future transactions using the Country VAT EC Sales Excluded option in [ System Values | Accounts | General ].
Note: Disabling this option only impacts newly created transactions. Existing records remain unchanged.
VAT Based on Delivery Address
The VAT based on delivery address setting in [ System Values | Accounts | General ] determines which VAT return receives the transaction.
Option Enabled
When VAT based on delivery address is ticked, the delivery country determines which VAT return is updated.
| Invoice Country | Delivery Country | VAT Return |
|---|---|---|
| UK | UK | UK |
| AUS | AUS | AUS |
| AUS | UK | UK |
Option Disabled
When VAT based on delivery address is unticked, the invoice country determines which VAT return is updated.
| Invoice Country | Delivery Country | VAT Return |
|---|---|---|
| UK | UK | UK |
| AUS | UK | AUS |
| UK | AUS | UK |
Note: Khaos Control may be enhanced in future to provide additional flexibility regarding whether VAT is based on the invoice address, delivery address or customer country.
Extending Country Specific VAT Beyond the EU
Country Specific VAT can be extended to apply to countries outside the EU.
For more information, see:
If you would like this functionality enabled, please contact Khaos Development.
Setting Up Country Specific VAT
Before you can use Country Specific VAT, the system must be configured correctly.
For setup instructions, see:
Using Country Specific VAT
Once configured, Country Specific VAT is applied automatically according to your country and stock settings.
For guidance on day-to-day usage, see:
Committing Country Specific VAT Returns
When processing VAT returns, country-specific transactions must be committed against the correct country.
For guidance, see:
Updating Country Specific VAT Rates
Country VAT rates should never be updated by simply changing the percentage value.
Instead, follow the dedicated rate update process:
Important: Directly editing VAT rates can lead to incorrect VAT reporting and should be avoided.
Customs Invoices
To ensure customs invoices display the correct VAT rate:
- Open [ System Data | International | Countries ].
- Enable the Use Customs Inv option for the relevant country.
This ensures customs documentation reflects the correct VAT treatment when producing customs invoices.
Related Articles
- How To: Setup Country Specific VAT
- How To: Use Country Specific VAT
- How To: Commit a Tax Return when using Country Specific VAT
- How To: Update Country Specific VAT Rates when the Rates have been Changed
- Tax_Register_Tab" target="_blank" rel="noopener noreferrer">[ Accounts | Tax ]
- SP Ledger