Configure VAT on collection management mode

Definition of VAT on incoming and outgoing payments/décaissements

VAT on collection is a method of charging Value Added Tax (VAT) in which the tax becomes due only when the customer actually pays, rather than when the invoice is issued.

• VAT is due when the company receives payment from the customer, in full or in part.
• Mainly applicable to supplies of services, unless the business opts for VAT on debits.
• Cash-flow advantage: the company does not pay VAT to the tax authorities until it has actually received the sum.

Accounting example of VAT on incoming payments for France :

A company provides a service to a customer on 10 January for the sum of 10,000 exclusive of VAT at 20% (2,000 VAT).

• Invoice date: 10 January
• Customer payment date: 25 February
• VAT method: VAT on collection

Accounting entries in the sales journal at the time of invoicing (10 January) for France :

DATE	ACCOUNT	DESCRIPTION	DEBIT	CREDIT
10/01/20**	411***	Customers	12,000
10/01/20**	706***	Service Revenue		10,000
10/01/20**	44587**	VAT Collected (NON-DUE)		2,000

• At this stage, VAT is not yet due to the tax authorities.

Accounting entries in the bank journal at the time of payment of the invoice (25 February) for France :

DATE	ACCOUNT	DESCRIPTION	DEBIT	CREDIT
25/02/20**	512	Bank	12,000
25/02/20**	411	Customers		12,000

Accounting entries in the miscellaneous journal at the time of payment of the invoice (25 February) for France:

DATE	ACCOUNT	DESCRIPTION	DEBIT	CREDIT
25/02/202**	44587***	VAT Collected (Non-Due)	2,000
25/02/2024	44571***	VAT Collected (Due)		2,000

• VAT becomes payable at the time of payment.
• With VAT on collection, VAT is declared and paid in February, at the time of payment, rather than in January as with VAT on debits.

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Configuring your VAT management mode

Once you have determined your VAT reporting regime from Settings > Invoicing > Invoicing settings, choose your VAT management mode for cash receipts.

Invoicing settings

You can customise the wording displayed on purchase and sales documents.

The VAT management mode can be defined by default from the invoicing settings, then from each item record, or from a sales or purchase line.

To find out or confirm your VAT management method, please contact your tax department or your tax expert. comptable.

Below you will find documentation on the other VAT management methods available:

Configuring VAT management for debits

Configuring margin VAT management mode