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What it does:
Lets you set up tax rates and templates, automatically calculate tax on sales and purchase transactions, and generate tax reports for filing.Why it matters:
  • Ensures regulatory compliance
  • Automates accurate tax calculations
  • Simplifies tax filing and audit preparation
Prerequisites
  • Your company’s Tax ID and Tax Authority details are available
  • Chart of Accounts includes tax receivable and tax payable accounts
  • Customers and suppliers have correct tax statuses (e.g., taxable vs. exempt)

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Steps to Configure and Use Tax/VAT

1

Set Up Tax Accounts

  1. Go to Accounts > Chart of Accounts.
  2. Create or verify:
    • Sales Tax Payable account under Liabilities
    • VAT Input account under Assets (for purchase credits)
  3. Click Save.
2

Create Tax Templates

  1. Navigate to Accounts > Setup > Tax Template > New.
  2. Enter:
    • Template Name (e.g., “Standard VAT @ 7.5%”)
    • Tax Rate (%)
    • Account Head: select your Sales Tax Payable account
    • Description (optional)
  3. Save the template.
3

Apply Taxes to Items and Parties

  1. Open an Item under Stock > Item >Item List.
  2. In the Sales tab, set Default Tax Template to your VAT template.
  3. Save.
  4. Repeat for Purchase tab if you reclaim input VAT on purchases.