Taxes and VAT rates setup in Skyline Nexus ERP

Setting up taxes and VAT rates

Setting up taxes and VAT rates is the work of telling Skyline Nexus ERP the exact percentages your tax authority charges, which of your prices already include tax, and which general ledger accounts collect what you owe and what you can reclaim. It matters because a wrong rate or a missing mapping does not stay a one-off error: it repeats on every invoice, purchase and expense until someone catches it, and it is what your VAT or GST return is ultimately built from.

This guide covers the business-level tax settings, creating tax rates and tax groups, applying tax to products, purchases and expenses, and the reports that let you check your VAT position before you file. It assumes you already know the rates your business must charge; if you are still working those out, your tax authority's own published rates are the only reliable source.

Before you start

You need the business_settings.access permission to change the Tax tab and tax_rate.create to add tax rates and groups; an administrator has both by default. Decide your business's tax registration details and its default rates before you start, since several other screens, including every product you add, pick up the defaults you set here.

If you sell in more than one country or region with different rates, plan your tax rates and groups first on paper: a rate you create once and reuse on every relevant product is far easier to maintain than one you recreate slightly differently each time a new product needs it.

Keep your tax rate names short and specific, such as the rate and what it applies to, rather than generic labels like Tax 1 and Tax 2: once a business has several rates and a group or two, a vague name is the single most common reason the wrong one gets picked on a new product months later.

Business-level tax settings

Settings, Business Settings, Tax tab holds four groups of fields. Tax Registration takes Tax 1 Name and Tax 1 No., plus a second pair, Tax 2 Name and Tax 2 No., for a business that carries two tax registrations, such as a VAT number and a separate excise registration. Default Tax Rates sets Default sales tax (whole invoice), the tax applied to an entire sale unless overridden, and Default product tax (per line), the tax pre-selected on a product line that has no tax of its own.

Tax Calculation & Display sets Tax & total rounding to Invoice level, the recommended setting that rounds once on the total, or Line level, an older method that rounds each line separately; two checkboxes, Enable inline tax in purchase and sell and Enable inline custom tax, control how tax is shown on those documents; and Final tax report amounts sets whether your tax report is built on tax-inclusive or tax-exclusive figures. An Advanced box adds Server-authoritative totals and a Total mismatch tolerance, which govern how strictly the server checks a submitted total against its own calculation, and a short note on how ZATCA reads zero-rated items and customer VAT numbers for Saudi businesses.

Creating tax rates

Add a rate under Settings, Tax Rates, Add Tax Rate. The form asks for a Name, a Tax Category (VAT, Excise, Service Tax, Customs, Duty, Withholding or Other), a Rate as a percentage, and a Zatca Zero Rated exemption code for a rate you will apply to a zero-rated item. Choosing Excise reveals a further checkbox, Calculated Before VAT (Cascading), for a duty that is added to the price before VAT is calculated on the combined total, a pattern common with excise and customs duties.

A rate you plan to combine with others rather than use on its own gets the For Tax Group Only checkbox, which keeps it out of the ordinary product tax pickers and reserves it for the Tax Groups screen described next. Every rate you create appears in the All your tax rates list with its name, rate and category, ready to assign anywhere tax applies.

Combining rates into tax groups

Where a single sale needs more than one tax added together, such as a VAT rate plus a local levy, build a tax group instead of trying to force two separate charges onto one line. The Tax Groups card, on the same Tax Rates screen, has its own Add Tax Group form: a Name and a Sub Taxes multi-select listing every rate flagged For Tax Group Only.

Skyline Nexus ERP then applies every sub-tax in the group whenever the group itself is selected on a product or a sale, so the invoice shows the combined rate while the underlying rates stay separately auditable. Keep a tax group's name descriptive, such as the two rates it combines, so anyone choosing it later understands what it actually charges.

Applying tax to products

Product-level tax fields only appear once Enable Price & Tax info is checked on Settings, Business Settings, Product tab. With it on, the Add or Edit Product screen shows a Tax and Pricing section with Applicable Tax, a picker defaulting to your Default product tax, and Selling Price Tax Type, Inclusive or Exclusive.

Choose Inclusive when the selling price you type already contains VAT, which is standard for goods sold to consumers in most of Europe and the Gulf; choose Exclusive when the price is a net figure and tax is added on top, which is common on business-to-business quotations. Getting this one field wrong on a product either overcharges or undercharges tax on every sale of it until you notice and fix it.

If a business sells the same product both ways, a retail counter price that includes tax and a wholesale price that does not, keep it as two separate products or price groups rather than switching the tax type back and forth on one record, since the tax type is a property of the product, not of an individual sale.

VAT and GST on purchases and expenses

A purchase carries its own order-level Purchase Tax, and each line on it has its own Product Tax column, so a single purchase from one supplier can mix taxed and zero-rated items correctly. An expense carries a single Applicable Tax field, picked when you record the expense, which is what lets a business reclaim VAT on eligible costs, such as fuel or supplies, rather than only on stock purchases.

On the ledger side, Fiscal Authority, Settings, General Settings, VAT Accounts holds the two accounts every taxed document ultimately posts to: VAT Input Account for tax you can reclaim, and VAT Output Account for tax you owe. Sign-up already points these at fixed codes for most currencies, VAT Input at 1165 and VAT Output at 2140, so a correctly taxed purchase or sale finds its way to the right side of the ledger without further configuration.

Worked example: output and input VAT for a Belgian gift shop

A gift shop in Belgium applies the standard 21% VAT rate. One product is priced EUR 121.00, Inclusive, so its net price is EUR 100.00 and its VAT is EUR 21.00. A cash sale of one unit posts debit Cash 121.00, credit Sales 100.00, credit VAT Output 21.00, and 100.00 plus 21.00 checks back to 121.00.

The same month the shop buys stock for EUR 300.00 net, Exclusive, plus 21% VAT of EUR 63.00, a total of EUR 363.00 on credit. The purchase posts debit Inventory 300.00, debit VAT Input 63.00, credit Accounts Payable 363.00, and 300.00 plus 63.00 checks back to 363.00. For the month, VAT Output of 21.00 less VAT Input of 63.00 leaves a net position of negative 42.00, a refundable credit rather than an amount owed, which is exactly what the VAT return for that period should show.

• Sale: debit Cash 121.00 / credit Sales 100.00 / credit VAT Output 21.00 (check: 100.00 + 21.00 = 121.00)
• Purchase: debit Inventory 300.00 / debit VAT Input 63.00 / credit Accounts Payable 363.00 (check: 300.00 + 63.00 = 363.00)
• Net VAT for the month: Output 21.00 minus Input 63.00 = negative 42.00, a refundable position

Checking your tax setup

Two report families let you check tax before you file anything. The core Reports menu has Tax Report and VAT Return, prefilled for a date range and location from your sales, purchase and expense documents on a tax-exclusive basis. Fiscal Authority, Reports, Tax & Compliance Reports has VAT Analysis, which reads the same figures straight from the VAT Input and VAT Output general ledger accounts.

Run both for the same period before you file and confirm they agree; because the same posting logic builds the GL VAT figures as builds the return, a mismatch almost always points to a document with the wrong tax rate, a product missing its Applicable Tax, or a manual journal posted directly to a VAT account.

Build this comparison into your normal month-end routine rather than leaving it until the filing deadline. Catching a mismatch with two or three weeks still on the clock gives you time to trace the one document responsible; catching it the day the return is due leaves you filing a number you cannot yet fully explain.

Common mistakes and how to fix them

Most tax setup problems are one of these, and each is easy to check once you know where to look.

• A product with no Applicable Tax set: it falls back to Default product tax, which may not be the rate that product actually needs, so check unusual products individually
• Mixing up Inclusive and Exclusive on a product: it changes the price the customer pays or the tax collected without changing the number on screen, so it is easy to miss until a customer questions their invoice
• Forgetting to mark a rate For Tax Group Only when it should only ever appear inside a combined rate, which lets someone apply it on its own by mistake
• Choosing Cascading for a rate that is not actually calculated before VAT, which overstates the VAT collected on that line
• A VAT Analysis figure that does not match the Tax Report or VAT Return: check for a manual journal posted straight to the VAT Input or VAT Output account rather than through a document