How to report VAT deductions on purchases

Setting up VAT reporting in your Balance Sheet

If you need to report VAT deductions on purchases and sales, follow these setup instructions
To separate taxes you've collected or paid from your balance sheet and profit & loss statement.

First, head to your tax settings

And edit Settings for Vat return

Make sure your two VAT accounts are set up correctly, one for to deduct and one for tax type accounts.

Next, go to your VAT Rates settings

Create two rates, one for purchases, and one for sales taxation

Settings for your Purchase rate


Settings on your sales taxation rate

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Be sure to add the Deduction components to each one and set it to the right accounts. For purchase rates set to your deduction account, VAT input. For sales rates, make sure the deduction is set to the Sales VAT account for output.


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