ANS-0867 · SUITETAX & TAX MANAGEMENT
How to Remit VAT or GST Tax Liability in NetSuite (EU/CAN)
Understand the process for calculating and remitting net tax liability to government agencies in NetSuite for non-U.S. editions.
Short answer
In NetSuite, remitting taxes for non-U.S. editions like EU or Canada involves calculating the net difference between collected sales tax and paid purchase tax. This requires closing tax periods, reviewing VAT reports, posting a journal entry to zero out tax accounts, and then using the 'Write Tax Liability' function to pay the tax agency.
Scenario
Organizations operating in regions such as Europe or Canada are required to remit to the government only the net difference between taxes collected from sales and taxes paid on purchases. The challenge is to properly zero out accumulated tax liability and asset accounts within NetSuite, which should then generate either an Accounts Payable or Accounts Receivable entry for the net amount due.
Solution
NetSuite automatically calculates VAT tax for European instances, provided the tax setup is correctly configured. However, the remittance of these taxes is a manual process. The procedure for remitting taxes and zeroing out accumulated tax liability and asset accounts is as follows:
Ensure appropriate tax codes are entered whenever sales and purchase transaction records are created.
Close the relevant tax period before proceeding with tax reporting and payments. This can be done by navigating to Transactions > Bank > Write Tax Liability (Administrator role required).
Run and thoroughly review the VAT on Sales and VAT on Purchases summary and detailed reports. If any adjustments are necessary, reopen the tax period, make the required changes, and then run the reports again.
If the VAT on Sales amount is greater than the VAT on Purchases amount, prepare and post an appropriate journal entry. This journal entry should:Debit the VAT on Sales account for the amount shown on the VAT on Sales report.Credit the VAT on Purchases account for the amount shown on the VAT on Purchases report.Credit the VAT Liability account for the net amount.
When it is time to pay the tax liability, a check can be written to the tax agency. For any non-U.S. edition or nexus, this can be done by navigating to Transactions > Bank > Write Tax Liability (Administrator role required).
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