Non-Recoverable Tax Examples

You may find it helpful to review examples that illustrate how non-recoverable taxes are calculated.

Example

Both scenario A and B start in the same way.

Tax Code A has these settings:

• Tax rate is 13%
• Non-recoverable tax percentage is 8%

You enter $1,000 as the net amount for an accounts payable voucher in the Transaction Center.

Scenario A:

Accounts are entered in the Non Recoverable Debit Tax Account and Non Recoverable Credit Tax fields. Project information is entered in the project fields in the Non-Recoverable Tax section on the Options tab of the Tax Codes settings form, in Settings > Cash Management > Tax Codes.

Results

The non-recoverable amount is not included in the net tax amount. The gross amount of the voucher is $1,130, the tax amount is $130, and the net amount is $1,000.

The general ledger entries are as follows when you post the transaction:

General Ledger Account	Debit	Credit
AP Liability		$1,130
Project Expense	$1,000
Debit Account entered for Tax Code A	$130
Non-Recoverable Debit Tax Account	$80
Non-Recoverable Credit Tax Account		$80
	$1,210	$1,210

The recoverable tax amount = $50 (130-80).

The non-recoverable amount = $80 (1,000*.08).

Scenario B:

The Non Recoverable Debit Tax Account, Non Recoverable Credit Tax Account, and project fields are blank in the Non-Recoverable Tax section on the Options tab on the Tax Codes form.

Results

The non-recoverable tax amount is included in the net tax amount because this is what is posted to the project. The gross amount of the voucher is $1,130, the tax amount is $130, and the net amount is $1,000.

The general ledger entries are as follows when you post the transaction:

General Ledger Account	Debit	Credit
AP Liability		$1,130
Project Expense	$1,000
Debit Account entered for Tax Code A	$130
Project Expense	$80
Debit Account entered for Tax Code A		$80
	$1,210	$1,210

The net tax receivable is $50 (130-80). Two transactions affect the billable project.