Minimalistic EU VAT

Configuration in
Dynamics AX
March 17, 2017 by Eugen Glasow

Introduction

Let me present my 4th iteration of the EU VAT setup in Dynamics. The below
concise VAT configuration in Dynamics 365 for Finance has been tested over
3 years of my operations. It has been constantly updated with the changes in
taxation. It covers intra-community import, export and import of services
within the European Union and beyond, domestic supplies, travel within the
EU and abroad.

Before we begin with the setup let me explain some background facts and
assumptions:

 Any export of goods or services in or outside of the European

Community is tax-free, but reported
 An export of services is special: in accordance with Directive
2008/8/EC any service rendered for customers abroad is subject to
reverse charge
 In the case of an intra-community (IC) delivery, goods and services are
presented separately on the EU Sales List
 On the contrary, goods and services delivered in the home country are
reported together and should not be distinguished
 Intra-community deliveries are reported separately from the foreign
trade with the so-called 3rd countries (i.e. countries which are not the
28 members of the EU, e.g. Norway or Switzerland). IC trade appears of
the EU Sales list, while 3rd country trade does not, but it is reported to
the INTRASTAT instead.
 Most of the countries apply a full rate and several reduced rates. The
reduced rates are there mostly for the basic consumer services and
goods (Austria: 10%). They normally do not affect enterprises, until the
employees start reporting travel expenses.
 A semi-reduced “hotel” rate of 13% stands out in Austria, but also in
Switzerland and France for accommodation. Update 2018: 13% were
reverted back to 10% in Austria, but I am going to keep it in my
scheme.
 A grocery may have separate tax codes for an IC acquisition of Polish
potatoes (self-assessed 10%) or French wines (self-assessed 13%).
However, the reduced-% goods and services are rarely imported by
manufacturing or professional service businesses, with the exception of
foreign books and printed media (self-assessed 10%).
  In Switzerland, the VAT receivable from investments is reported
separately from the VAT received from current assets or services (de-
ch: “Vorsteuer auf Investitionen und übrigem Betriebsaufwand” vs
“Vorsteuer auf Material- und Dienstleistungsaufwand“) despite the
same rate.
Since 2019, a similar aspect has become valid in Austria too. The
mandatory Chamber of Commerce contribution (de-at: “Kammerumlage
1” or KU1) is evaluated at 0,29% of the total VAT receivable excluding
any investments i.e. assets acquired either domestically or abroad.
The reduced VAT (foodstuffs, pharmaceuticals) may be neglected: milk
is unlikely to become a long-term asset, unless condensed 😉
 From the system point of view, there is a difference between a “zero
rate” and “no rate”. A tax code with a 0,00 rate still logs the tax base
for reporting, as long as a record in the tax Values table exists.
 From the fiscal standpoint, there is a difference between a “zero” an
“no” rate too. For example, in the UK public transportation is taxable at
0% which is considered a tax rate of its own. In France, 0% is applied to
newspapers. To enable a zero rate, just open the Values table in
connection with the tax code, let the system create a record, leave
the Value = 0,00000 and save the record.
 It is a good practice to have a valid tax code, i.e. a valid Customer/Item
group combination in every business case whenever it is reported on
the tax declaration or not. This is enforced by keeping the tax
parameter Check VAT groups active. For example, on a business trip
from the UK to Hungary the VAT may theoretically be recovered, but
hardly any company does it. The tax codes TF and NR below help stay
compliant to the Check VAT groups setting.

VAT codes (en-us: Sales tax codes)

Tax
Rate
cod Name Example
AT
e

Sales or purchase of regular goods and services,

Domestic
vatF 20% e.g. raw materials, office consumables, car
VAT, full
expenses (electric cars or ‘fiscal cars’ only)

Domestic
vat Investments in long-term assets, i.e. machines,
VAT from 20%
A office equipment, electric car fleet
assets, full

Reduced
vat This reduced rate applies to accommodation, but
“hotel” 13%
H not restaurant bills
rate

Domestic Public transportation, taxi, and basic foodstuffs,

vat
VAT, 10% including restaurant bills with non-alcoholic
R
reduced beverages, books and newspapers

TF Tax free 0% Exempt international air and sea transportation, or

 services delivered by “non-genuine” tax exempt
suppliers such as insurances, postal services (de-
Out of at: “unechte Steuerbefreiung“), but also the City
scope tax (de-at: “Tourismusabgabe“, “Ortstaxe“)
component on hotel bills. The base on purchases
may still be reported to the authorities.

On a travel abroad, services consumed by the

employee are taxable per se, and within the
European Community the tax may even be
Not
recovered, but very few companies do so. The
NR recoverabl –
code is not reported to the authorities. Running
e
expenses from traditional personal cars with
internal combustion engines fall into this category
too.

Delivery of goods to another country of the

European Community is tax free, but the value of
the goods is reported to the tax authority.
On a regular import of goods from another
IC export
0% member of the European Community the full
euF IC
20% domestic tax is levied; the tax is self-assessed with
acquisition
a zero effective tax load (what you pay is what you
get recovered). This is achieved with the Use
tax (en-us) i.e. Import VAT / purchase VAT (en-gb)
setting in the VAT group.

It is highly likely, that the investments into long-

IC asset
term assets (machinery, other equipment) go into
export 0%
euA another EU country. Less probably but also
IC asset 20%
possible, is that used assets are sold into an EU
acq.
country.

Delivery of goods to another country of the

European Community is tax free, but the value of
the goods is reported to the tax authority.
Reduced IC
On goods that would be subject to the reduced tax
export 0%
euR rate domestically (e.g. books), the same reduced
IC 10%
tax rate is applied when procuring such goods
acquisition
from another member of the EU; the tax is self-
assessed with a zero effective tax load and
the Use tax setting in the VAT group.

Delivery of services in another country of the

IC services European Community is tax free but reported.
export 0% The buyer, however, must obey the reverse
euS
IC services 20% charge principle. The setup for the reverse charge
import and the zero tax impact is similar to the above IC
goods acquisition.

3rd Export 3rd 0% The export of goods is tax free in most of the
 countries, but the value has to be reported.
Tangible goods imported into the EU from a 3rd
country is subject to an import tax, whose base is
hard to calculate because it includes the portion of
county
~20 insurance and freight up until the border. Normally
F Import 3rd
% the import tax is calculated and paid by the
country
customs broker; in the exotic import tax self-
assessment mode (de-at: “Einfuhrumsatzsteuer
geschuldet”) this 3rdF tax code may be used to
post the tax.

If the place of supply of services is outside of the

Services EC, the export is tax-free but still have to be
3rd export 3rd 0% reported (as taxable elsewhere under the reverse
S Services 20% charge regime).
import 3rd The procurement of services outside of the EC is
subject to a self-assessed reverse charge.

VAT groups (en-us: Sales tax groups)

In every business case in Dynamics 365 for Finance, the tax code is deducted
by the system from an intersection between the customer/supplier VAT
group and the product Item VAT group. Aside of the basic “F”, “S”, “TF” item
VAT groups I recommend “H”, “Food” and “PubT” for the travel expense
reporting. The reason to separate the latter 2 groups is my reverence to
companies recovering foreign taxes: tax rates for these categories vary
across Europe.

The group AP-NR is used in the Travel and Expense module to have a formal
tax code TF even if the VAT is not recoverable, and satisfy the Check VAT
groups validation in the tax module.

Tax codes to be marked Exempt in the VAT group configuration are stroke
through in the table below, and those marked as a Use tax are in italic:

Item Item Item

Customer Item Item VAT Item
VAT VAT Item VAT
or VAT group VAT
group group VAT group
supplier group “S“ group
“A” “TF“ group “PubT“
VAT “F” (services “H”
(assets (tax “Food“ (public
group (full) ) (hotel)
) free) transp.)

Suppliers

AP-DOM vatF vatA vatF TF vatH vatR vatR

AP-EU euF euA euS TF euR

AP-3RD 3rdF 3rdS TF

 AP-NR NR NR NR NR NR NR NR

Customer
s

AR-DOM vatF vatA vatF TF vatH vatR vatR

AR-EU euF euA euS TF euR

AR-3RD 3rdF 3rdS TF

Disclaimer

The above configuration is going to work well in the D-A-CH countries, in

Scandinavia, and even in Spain. Yet it doesn’t account for the “VAT on
payment” aka Conditional tax common in France (de: “IST-Besteuerung“),
and it will probably not work for countries with inflated reporting
requirements (Italy).

This blog is followed by Part 2 – selection of the VAT reporting codes for the
Austrian VAT declaration.

3 responses to “Minimalistic EU VAT Configuration in Dynamics AX”

1. Eugen Glasow says:

October 2, 2017 at 10:38 am
Dear Zvika,
1) First of all, tangible import from a 3rd country is not subject to a
reverse charge, but an import tax (of a variable rate).
2) The group AP-NR was introduced for an utterly formal reason: If you
keep the tax parameter Check VAT groups active (which is a good
practice) you formally need a valid tax code on every Customer/Item
group combination. On a business trip from the UK to – let’s say –
Hungary you may theoretically recover VAT, but hardly any company
does it. The group AP-NR is then used in the Travel and Expense
module to reflect this practice, while staying compliant to the “Check
VAT groups” setting.
3) I can reassure you that the “Use tax” is the right approach in most of
the European countries. The feature you are referring to is a part of the
UK localization and only available in legal entities with a primary
address in the UK. After the Brexit in a year from now this is going to
change anyway 🙂
2. Zvika R says:
September 27, 2017 at 9:22 pm
Another question I have – your AP-NR group which I understand to
mean “import from outside the European community” does not seem to
be set up to perform reverse charge on purchases? Is that correct?
I thought all EU countries are required now to record reverse charge on
purchases from outside the community.
3. Zvika R says:
September 27, 2017 at 9:21 pm
Your approach to reverse charge (using “use tax” configuration) is
interesting.
It seems a correct way, while at the same time Microsoft themselves
recommend a different approach (by using 2 VAT codes for the +% and
-% amounts):
https://technet.microsoft.com/en-us/library/gg231022.aspx
Did you consider the Microsoft approach? what was the reason not to
use it?
Austrian VAT
declaration /
Umsatzsteuervoranme
ldung 2020
April 10, 2017 by Eugen Glasow

Following up on my latest blog, let me continue with the specific setup for the
VAT return in Austria. This electronic VAT declaration
called Umsatzsteuervoranmeldung “UVA” must be uploaded monthly or
quarterly (depending on the company’s turnover) in a proprietary XML format
to the web site FinanzOnline of BMF, the Austrian Ministry of Finance. The
interface is well maintained by the DACH support team for Dynamics, but
there was nowhere on the Internet a description of the barebone setup. Well,
up until now.

The only documentation is the class TaxReport_ReportAT, which is used by

the periodic function VAT payment in the Tax module to produce a “UVA”
declaration, both printed and the electronic. I reverse engineered it, and it
should be noted that

 It requires a non-continuous number sequence XML VAT package

number to form a message ID.
 The printed PDF version is not accepted by the ministry anymore, but it
is quite useful to visualize and check the VAT return prior to the
booking. The latest template required by the class can be
downloaded here.
 The printed form expects an exotic address format of the legal entity
primary address, one with a separate house number Street number.
 The tax number (not to mix with the European VAT (UID)-number)
MUST be present in the legal entity, Tax registration number field in the
format xxx/yyyy-ZZ, where ZZ is the number of the BMF’s local office.
The same can be seen without dashes and slashes on FinanzOnline.
 The class uses a set of hardcoded 4 digit codes to map tax codes to
cells on the tax return. There are cells (and the respective XML
elements) for a total tax base per tax period per VAT rate, or a tax
amount per tax period per VAT rate.

Below are the most relevant VAT return cell codes. For more information on
the individual VAT return cells, please refer to the
comprehensive description (de-at) on the BMF site.
You should add the 16 codes to the table VAT reporting codes with the Report
layout = Austrian report layout.

Reportin
Report text Brief description
g code

Gesamt Umsatzsteuer: 20%

1122 Total sales VAT: full 20%
Normalsteuersatz

Gesamt Bemessungsgrundlage: 20%

1022 Total sales base: full 20%
Normalsteuersatz

Bemessungsgrundlage:
Sales base: Export 3rd
1011 Ausfuhrlieferungen § 6 Abs. 1 Z 1 iVm
country tangible
§7

Bemessungsgrundlage: Sales base: Reverse

1021 Steuerschuldübergang § 19, charge incl. export of
grenzüberschreitende Leistungen services IC, 3rd

Bemessungsgrundlage: übrige
Sales base: Other
1020 steuerfreie Umsätze ohne
exempt sales
Vorsteuerabzug

Bemessungsgrundlage: IgL Art. 6 Abs.

1017 Sales base: IC delivery
1 ohne Fahrz

Total purchase VAT

1160 Vorsteuer ohne…
except for…

Steuerschuldübergang bei Bezug IC purchase payable VAT:

1157 gemäß § 19 Abs. 1 zweiter Satz, § 19 Reverse charge on
Abs. 1c service acquis

Vorsteuer: Steuerschuldübergang IC purchase receivable

1166 gemäß §19, grenzüberschreitende VAT: reverse charge on
Leistungen service acquis

Vorsteuer: Einfuhrumsatzsteuer Purchase 3rd country

1183
geschuldet (§ 12 Abs. 1 Z 2 lit. b) import VAT (payable)

IgE Steuerschuld: 20% IC purchase payable VAT:

1172
Normalsteuersatz full 20%

IgE Bemessungsgrundlage: 20% IC purchase payable

1072
Normalsteuersatz base: full 20%

Gesamt Umsatzsteuer: 13% Total sales VAT: reduced

1106
ermäßigter Steuersatz 13% (agro B2C)

1006 Gesamt Bemessungsgrundlage: 13% Total sales base: reduced

 ermäßigter Steuersatz 13% (agro B2C)

Total sales VAT: reduced

Gesamt Umsatzsteuer: 10%
1129 10% (foodstuffs, print
ermäßigter Steuersatz
media)

Total sales base: reduced

Gesamt Bemessungsgrundlage: 10%
1029 10% (foodstuffs, print
ermäßigter Steuersatz
media)

Finally, the above 16 reporting cells are assigned to my 12 VAT codes in

the VAT codes table:

Report eu eu N do do do
exF exS euF euS TF doF
setup A R R A H R

Taxabl 102 102 100 102

e sales 2 2 6 9

Duty-
101 102 101 101 101 102 102
free
1 1 7 7 7 1 0
sale

VAT
112 112 110 112
payabl
2 2 6 9
e

Taxabl
e
purcha
ses

Duty-
free
purcha
se

VAT
116 116 116 116
receiva
0 0 0 0
ble

Taxabl
107 107 107
e
2 2 3
import

Offset
taxable
import
 Import
VAT/ 118 117 117 117 115
purcha 3 2 2 3 7
se VAT

Offset
import
116
VAT/
6
purcha
se VAT

(EU
sales
ye
list yes yes yes yes yes yes yes
s
exclude
d)

(Countr Do Do Do Do Do
3rd 3rd EU EU EU EU
y type) m m m m m

The Report setup – credit note of the VAT code records is identical.

The full list of the Austrian VAT reporting codes can be downloaded here. The
not relevant codes are marked “N/A”. My criteria for the relevance for a
typical manufacturing or a service business were:

 Reselling of cars, scrap, gas, electricity, CO2 certificates are ‘exotic’

businesses, as well as seafaring, trucking, taxi services, real estate
agencies;
 Small businesses below the 100 000 EUR turnover threshold would
never use Dynamics AX either;
 The Jungholz and Mittelberg exclave valleys with the German VAT are
too small to get noticed;
 It is not practical to apply a dedicated tax code to goods intended for
the self-consumption by the company owner: such goods do not reduce
the income/corporate tax base either and should better not appear in
the accounting at all, or be simply sold to the owner via a sales order as
everything else.

Happy tax paying!