How the country of incorporation is reflected in the VAT Setup
It all boils down to VAT Business Posting Group. VAT has been the topic of the week here at On Point, well probably even for longer than that. Never in our lives have we experienced so many queries related to VAT as our clients are facing changes which are being applied seemingly on a daily basis. And never has it emerged so clearly that the knowledge related to the VAT from a Business Central point of view is somewhat obscured, as in people have an idea of what is required but no-one seems to be that sure of what needs to be done or the thinking process behind it.
Facing this scenario we have decided to describe in detail the options available and some best practices which we have learned over the years.
As most of you are aware, the starting point of a VAT Setup is the VAT Business Posting Group, which practically refers to the place where the vendor or customer is registered. Putting it this way is actually a simplistic approach as in actual terms the VAT Business Posting Group should reflect the country where the service is enjoyed as this may give rise to different rates and different VAT treatments. However, for the benefit of the majority, we'll be sticking to the first explanation.
When listing out the different VAT Business Posting Groups we need to take into consideration the following factors:
Where is our customer/supplier incorporated
Is our customer/supplier actually VAT-Registered
Our VAT Business Posting Groups must reflect both factors and in actual fact, we will have a variety of all possible outcomes in the course of our business. This explains why it's crucial that when handling EU transactions one of the permutations to consider is whether the customer/supplier is VAT Registered as this will ultimately give rise to a different VAT treatment. Rather than expecting the end user to get to know the rules by heart, we are to automate the setups to reflect the default options and thus leaving little room for error.