[BASIC FEATURES] Tax closing
Summary
TLDRThis video explains the concept of tax closing, a legal process for businesses to settle taxes either monthly or quarterly. It covers how to calculate the balance between taxes received from customers and taxes paid to vendors, and how to submit the tax report. The video also demonstrates the process of settling tax accounts, using VAT accounts as an example. The steps for automating this in Odoo software, including setting up tax configurations, closing journal entries, and sending reports to tax authorities, are also detailed.
Takeaways
- 📊 Tax closing is a necessary process for companies to submit their tax reports, either monthly or quarterly.
- 💡 The tax closing involves calculating the total taxes received from customer invoices and paid through vendor bills, determining if more tax needs to be paid or refunded.
- 📋 In the software (ODOO), taxes paid and received are accumulated in the tax report using the tax grid for proper calculations.
- 🔄 The tax closing entry is crucial for settling tax accounts and transferring any remaining amounts into the VAT current account.
- 🔍 Accounting-wise, customer invoices and vendor bills increase the tax paid or received in respective tax accounts, which need to be settled at the end of the period.
- 📈 At the end of each period, tax accounts should be balanced to zero, with the remaining difference moved to the VAT current account, representing either a payable or receivable amount.
- 🔧 The periodicity of tax reports can be configured within the software, accommodating different reporting requirements like monthly, quarterly, or even bi-monthly.
- 📑 You can generate a tax closing journal entry automatically through the tax report function, ensuring that all tax accounts are settled correctly.
- ⚠️ Once the tax closing entry is posted, a tax lock date is set, preventing further changes to the tax report for that period.
- 🌐 The software supports direct submission of tax reports to certain legal authorities' websites (e.g., HMRC in the UK) or allows for exporting the necessary XML files for manual submission.
Q & A
What is tax closing?
-Tax closing is the process of settling all tax accounts at the end of a reporting period (monthly or quarterly) by calculating the total taxes received from customer invoices and the taxes paid on vendor bills. The difference determines if you need to pay or reclaim taxes.
How does a company determine whether to pay additional tax or reclaim tax during tax closing?
-A company compares the total tax received from customer invoices with the total tax paid on vendor bills. If the tax received exceeds the tax paid, the company needs to pay the difference to the government. If the tax paid is higher, the company can reclaim the excess tax.
What role do tax credits play in tax closing?
-Tax credits are recorded in the tax configurations and are used to compute the total tax amounts in the tax report. The tax closing entry ensures that these amounts are settled in the tax accounts.
What happens to the tax accounts during the tax closing entry?
-During tax closing, the tax accounts are settled to ensure their balances are zero. The remaining amount, representing the difference between taxes paid and received, is transferred to the VAT current account.
What is the VAT current account, and when is it used?
-The VAT current account records the remaining balance after settling the tax accounts. If a company has received more tax than it has paid, it records the balance as an amount owed to the government. If it has paid more, it records the balance as a receivable.
How does the tax closing process work automatically in Odoo?
-In Odoo, the tax closing process can be done automatically through the tax report feature. Once the configuration is complete, the system calculates the closing journal entry, settles the accounts, and transfers the remaining amount to the VAT current account.
What is a tax log date, and why is it important?
-The tax log date ensures that no entries affecting the tax report are made after the tax period has been closed. Once the tax report is submitted, the log date prevents any further changes to avoid altering the declared taxes.
Is it possible to change the tax periodicity in Odoo?
-Yes, Odoo allows you to configure different tax periodicities, such as monthly, quarterly, or every two months, depending on the legal requirements of the country.
Can Odoo directly send tax reports to legal authorities?
-Yes, in some countries, Odoo can directly send tax reports to the relevant authorities. For example, in Belgium, Odoo generates an XML file that can be uploaded to the tax platform, and in the UK, Odoo can send the report directly to HMRC.
What happens if a mistake is found in the tax report after submission?
-If a mistake is found in the tax report after submission, it cannot be altered for that period. Corrections must be made in the next reporting period.
Outlines
💡 Understanding Tax Closing in Odoo
The first paragraph introduces the concept of tax closing, explaining how companies are required to submit a tax report either monthly or quarterly. It discusses that at the end of each period (monthly or quarterly), businesses need to calculate the total taxes received from customer invoices and the taxes paid through vendor bills. The purpose is to determine if additional tax needs to be paid to the government or if a refund is due because too much tax has been paid. The paragraph then elaborates on how Odoo accumulates taxes paid and received in the tax report using the tax grid, and how these amounts are extracted to be submitted to the relevant legal organization. The tax closing entry is essential for settling all tax accounts, and any remaining balance is placed in the VAT current account. Additionally, it emphasizes that taxes should be recorded accurately to avoid discrepancies.
🧾 Steps for Tax Account Settlement
This paragraph focuses on the practical steps involved in closing the tax accounts at the end of a tax period. It illustrates how to settle the tax received and paid accounts, ensuring their balances are reduced to zero. The paragraph provides a detailed example using a customer invoice and a vendor bill to show the entries in various accounts such as income, receivables, payable, and expense accounts. It then highlights that any remaining difference between taxes received and taxes paid is allocated to the VAT current account. The example includes Belgium-specific account numbers and emphasizes the importance of ensuring that debit entries equal credit entries, maintaining balanced records.
🔧 Automating Tax Closing with Odoo
The final paragraph discusses the automation of the tax closing process using Odoo. It explains that users do not need to perform the tax closing entry manually because Odoo's tax report feature allows this process to be done automatically. By configuring the system correctly, users can generate a closing journal entry that settles all tax accounts, showing the remaining balance in the VAT current account. It also highlights that, once posted, the tax log date is updated, preventing any modifications that could impact the closed period's tax report. Additionally, it mentions that for certain countries, such as Belgium, the tax report can be directly exported to the legal authority's website in XML format, and for the UK, there's a direct connection with HMRC.
Mindmap
Keywords
💡Tax Closing
💡Tax Report
💡Tax Credits
💡VAT Current Account
💡Tax Log Date
💡Customer Invoice
💡Vendor Bill
💡Tax Configurations
💡Closing Journal Entry
💡Legal Organization
💡XML File
Highlights
Introduction to tax closing, the process required for companies to submit their tax reports monthly or quarterly.
Explaining the importance of summing up all received taxes from customer invoices and taxes paid through vendor bills at the end of a period.
Clarification that businesses need to pay or retrieve tax based on the balance between taxes paid and received.
Odoo accumulates taxes paid and received into a tax report using the tax grid, which is configured for each company.
At the end of a period, the tax accounts need to be settled, ensuring the balance is zeroed out before moving the remainder to the VAT current account.
Explanation of how Odoo automatically sets the tax lock date to prevent users from modifying closed periods after posting a tax closing entry.
The video demonstrates a detailed walkthrough of customer invoices and vendor bills entries, explaining the accounting flow of tax received and paid.
Detailed steps on how to settle tax accounts at the end of the period, using an example with customer invoices and vendor bills.
Balancing the debit and credit accounts, and moving the difference to the VAT current account to reflect tax payments owed or refundable.
Explanation on configuring periodicity and tax accounts in Odoo, tailored to specific regional tax rules.
Highlighting the automatic generation of tax reports and how users can configure Odoo to perform tax closing entries efficiently.
Odoo's ability to configure the VAT current account and apply tax lock dates ensures compliance with legal tax requirements.
In some countries like Belgium and the UK, Odoo supports direct submissions of tax reports to government platforms such as HMRC.
Explanation on Belgium-specific legal control points in the tax report, ensuring base and tax amounts match.
Clarifying that tax entries from the period are not automatically reconciled, and it is not recommended to make tax accounts reconcilable.
Transcripts
hello deodorants and welcome to this new
video
about the tax closing what is tax
closing exactly
how do you do it inudo well first
as a company you need to submit your tax
credit tax report it's a legal
requirement and it needs to be done
monthly or quarterly
it means that um at the end of the
period
or it's at the end of the month or the
end of the quarter you need to make the
sum of all the taxes that you've
received
through uh your customer invoices and
the tax that you've paid
through your vendor bills and you need
to make the sum of that and see if you
need to pay
more tax to the government or indeed you
need to retrieve some because
you've paid too much throughout the
period
in a do we accumulate the taxes paid and
received in the tax report
thanks to the tax grade so remember that
in the tax video
uh i told i talked to you about the tax
credits that are in the tax
configurations
it is those are there so that we can
compute
all the tax amounts in the tax report
and
through the tax report we are going to
um
extract the um the amounts and to be
able to submit them to the
legal organization responsible for taxes
at the end of the period the tax closing
entry is necessary to settle all the tax
accounts and put the remaining amount in
the vat current account
so accounting wise what happens is that
every time you register a customer
invoice or vendor bill
or any entry with taxes in it um
you're gonna you're gonna increase the
amount in the tax accounts
so tax paid or tax received at the end
of the period you need to settle these
accounts so make sure that
the the balance is down to zero and the
of course there's going to be a
difference
because it never happens that you pay
the exact
amount of tax as the tax receives that's
a school use case
and the remaining amount should go in
the vet current account
when the entry is posted in a due
automatically you're going to have the
tax log day sets to make sure that you
don't
impact closed periods so let's just see
together what i mean when i talk about
uh settle the tax accounts and the tax
closing entry
so i'm just going to jump into my little
excel and show you
how what happened what happens basically
in the accounting so you're going to
have
our customer we're going to have a
customer invoice for example
and we're going to have our receivable
account
and our
income account and our tax
received which is uh going to be
the account 4510 in belgium so i've sold
for
a hundred so i'm gonna have on the
credit side because
the income account uh if you want to
increase the value remember
it's a credit it's going to increase on
the credit side
you're going to have the 21 euros
because you've sold with a 21
rate on the tax received
and finally the the total amount would
go on the debit side for the receivable
account
same thing for vendor bill so we're
going to have uh the account
payable the
tax paid account
and the inc expense account
okay so you're going to have this the
entry so the vendor entry
and same thing here but we're going to
increase uh
let's say we have uh sold for 300 here
so here in that case we're going to make
300 times
0 21. so for 63 and the total of it
would be
here plus the sum like this
so you're gonna have um a vendor bill
here so you see that
in the account what happened if we put
our little t's and see what happens
exactly
i'm gonna have the account four thousand
seven thousand
forty five ten i'm just going to copy
paste
this you have all the accounts
six thousand and uh 44
okay so if i just fill in the
information in the cheese instead
what's going to happen is that on my
receivable i'm going to have the
121 100 in my
income account and the 21 in my tax
account so the all
these two are my tax accounts okay
then i'm gonna have um let me just color
these two
to see that these match together
here and then afterwards we're going to
have a vendor bill so
on the uh here on the debit side we're
going to have the account
6 000 we're going to have then
the um tax on the tax payer i've
uh it was the wrong account
so here this should go there instead
sorry a little mistake and finally the
payable account on the credit side for
306
euros we're gonna color all this
together
like this okay so this is what happens
at the end of the period we have all our
accounts
opened what we need to do for the tax
closing entry
and this is uh what i said earlier we
need to settle
the tax account so we need to make sure
that those two accounts are down to zero
okay
uh so the tax closing entry is going to
take again
the same accounts okay and we're going
to take
uh so this one is tax received and this
one is
tax paid okay
we need to settle the account so i'm
going to put
the contrary so the same amount but on
the credit side
for uh the tax paid account and here the
tax
received account in here so that at the
end
the balance is down to zero here
okay that's the most important thing for
the tax closing entry
but of course if we if we do this on the
tax risk
on the tax paid we're going to have 21
here and on tax receipt we're going to
have
63. so you see that the entry is
unbalanced
because we've received more tax than
we've paid them so
it's important that the the entry should
be balanced
uh remember that debit should always
equal credit so we're missing
an amount on the debit side uh which
corresponds to
42 euros and this amount should go in
what we call the v80 current
account and if
here in our case we need to repay some
tax to the government because we've
received more than we've paid
um so in that case it's going to be a
the
account 4512 and in the case that uh
where we need to retrieve some money
from the government it would be the
account
41 12. but this is belgium specific
so um just remember that uh
you need to put the remaining remaining
amount in a current account
and your clients of course will know
what you're talking about
so here i'm going to put vt current
account
and i'm just going to duplicate this
here and put the remaining amount
in here okay so when uh not 63 42.
so this is how you make
a tax closing entry this is how it works
accounting wise so
if you basically you are settling the
account so
all these are down to zero for the new
period but
the remaining amount is supposed to go
in the vat current account
uh to make sure well that you afterwards
you'll need to pay of course this amount
to the tax organization let's jump back
in audio
and see how this works how you can
configure this
so i've talked about the vt current
accounts and the tax log date
um let's use a use case just to
illustrate that so for
our fping cars company we need to define
the periodicity information so for the
frequency
uh we need to um close the year uh
we need to close the period quarterly
the journal should be tax closing
journal
and the current account should be 41 12
and 45
12. so inodeo
how do we translate that you can define
the periodicity of the tax
report in the settings so you should go
in the settings of the application
and in here you have the tax return
periodicity so we're going to switch to
quarterly
and in the journal we're going we need
to create one so
first i'm going to create a new journal
for the tax closing journal instead okay
so i'm gonna put
tax closing miscellaneous
and just put tax as a short code
let's go back to the settings quarterly
and tax closing here save
so that's the first um configuration
that you need to do
second you see that under this uh
configuration you see you have
configure your tax accounts and that's
really important before going live
because uh that's there that you'll put
your current
tax account payable and receivable okay
so uh you see that it's already
configured for belgian localization but
sometime it's not so it's important that
you fill this in
um so you have the current account for
the payable and the receivable side so
everything is already configured for me
and you see that this information is
filled in by tax group
so you see that it's based on each
uh percentage its rates uh so because in
some countries depending on the rate you
can have a different payable
receivable account involved so that's
that's it for me for the configurations
uh when you want to fill in this closing
tax closing entry you don't have to do
this
manually you can do this automatically
through the tax report
so when i go in the tax report or here
i have the belgian tax report ready and
i can decide to click
on closing journal entry so by doing so
if i do this since i've configured this
properly
you see that it's going to
settle my account so i have my vt
payable because i had some
invoices ready already in my system
some vt recoverable and you see at the
bottom here
you're gonna have the current account
for the
settlement so the remaining amount so
all these are
how we settle the accounts for the vat
because we had some open items in the
system
and then the difference between um the
difference between the two
will go in the current account in here
once you post this entry what's going to
happen
is that first uh well all your accounts
of course are going to be settled but
second
you're going to have a tax log date set
up so if i decide to post the entry
if it's yeah okay so i've posted my
entry but in
my log dates here you see that
in the tax log date i have now the the
date
for the end of the period because um you
need to make sure that
any no user can add new entries that
will impact the tax report because once
you've declared the tax report
then afterwards um you can't you can't
alter it you can't update it
if you have made a mistake you need to
correct it in this the next period
okay guys um frequently asked question
for one of our child companies in the uk
the tax periodicity needs to be done
every two months is it possible in ado
yes it is
because if you go back in the system and
you've probably seen it already
in the settings you are
can actually choose multiple
periodicities uh
most of the time in europe it's going to
be monthly or quarterly
uh but in some countries they need a bit
more uh
than different periodicities so you have
indeed
more than those two possibilities
in belgium the tax report has mandatory
legal control points
do those exist in urdu so what is a
control point it's basically going to
say okay this line should be
the percentage of this line because in
the tax report
uh you need to declare both the base and
the tax amount so the base amount if
you've sold for 100
and you have a tax of 21 the base is
going to be the hundreds and the tax
amount of course is going to be 21
and you should declare both uh both
amounts
and in the belgian uh in the belgian
um tax report these there are these
control points and
if those are not respected properly then
you will see here
a um error message saying hey pay
attention because this control point is
not respected
when the tax closing entry is posted are
the tax entries from the period
automatically reconciled no it isn't
there is actually no point in that
because the accounts are not
reconcilable
you can put them in reconcilable but i
do not advise it because uh remember
that if you do that
you're going to see the tax amounts
appearing in uh
your reconciliation interface and it's
not something that i should
i would recommend can we send directly
from or do the tax report to the legal
authority's website
uh for some countries you can so for
belgium it is possible
because you can uh export the xml
so by clicking on this you're gonna have
um
you're gonna have the xml that's been
generated
given the fact that you have the proper
information filled in for your company
um and you can just upload it into the
right uh to the
the tax platform for the uk for example
you're going to have a connection to
hmrc
which is um also the
tax platform and it will send directly
the tax report
to the platform you won't even have to
upload it so depending on the country
you're going to be able to check to see
if there is
an xml file or a connection with the tax
website i advise you to look at the
documentation
on odu just to see if the local
localization provides this kind of
service on
that's it for me in this video thank you
all for watching and see you in the next
topic
Ver Más Videos Relacionados
5.0 / 5 (0 votes)