Combined tax is a tax mode designed to support Canadian tax and other multi-tier tax regimes. It allows two tax codes such as Federal Tax and Provincial Tax to be combined under one "parent" tax code. During document entry the user specifies just the parent tax code; FinancialForce Accounting then calculates the tax values for the two "child" tax codes and sums them to give the tax value for the parent tax code.
When creating a parent tax code, you select the two child tax codes and the tax model which determines how combined tax is calculated when creating sales documents and payable documents. The tax model options are:
- None. Use this tax model if you are setting the tax rate directly on this tax code. The tax code is not a parent tax code and does not have any children. When this tax code is used in document entry, tax details are stored in the Tax 1 fields on the document line item.
- HST - Harmonized Sales Tax. Tax values are calculated from two child tax codes. The calculated tax details are stored in the Tax 1 fields on the document line item. Separate tax details are not stored for the child tax codes.
- PST&GST - Provincial Sales Tax & Goods and Services Tax. For accounts receivable transactions (sales invoices and sales credit notes) tax values are calculated from two child tax codes. The calculated tax details are stored separately in the Tax 1 and Tax 2 fields on the document line item. For accounts payable transactions (payable invoices and payable credit notes) PST is not charged therefore users should enter these documents using a standard GST tax code.
- GST&QST - Goods and Services Tax & Quebec Sales Tax. Tax values are calculated from two child tax codes. The calculated tax details are stored separately in the Tax 1 and Tax 2 fields on the document line item.
The tax models GST, PST and QST should be selected on child tax codes if you want the child tax details to be itemized in PDF versions of sales invoices. See "Including Child Tax Details in the PDF version of a Sales Invoice" lower down this page for more information.
See Setting up Combined Tax for full details of the setup required before you can start creating parent tax codes and entering combined tax documents.
Parent and Child Tax Codes
A child tax code is a regular tax code with one or more tax rates defined on it. The Parent checkbox is not enabled and no child tax codes are specified on it.
A parent tax code has the Parent checkbox enabled and two child tax codes specified on it. No tax rates are defined on a parent tax code; instead its tax rate is calculated from the rates on its children. Whenever you add or edit tax rates on a child tax code, tax rates on the parent are added or updated to reflect the sum of its child tax rates.
A child tax code can be linked to multiple parent tax codes. A parent tax code cannot be linked as a child to another parent tax code.
Entering Documents in a Combined Tax Company
You can enter sales invoices, sales credit notes, payable invoices and payable credit notes with combined tax.
When you post a document, a separate tax transaction line item is created for each child tax code. The child tax codes are recorded on the analysis transaction line item.
Including Child Tax Details in the PDF version of a Sales Invoice
When viewing or emailing a PDF version of a sales invoice, details of the child tax codes applied to invoice lines will only be displayed if the appropriate tax model is set on the child tax code. The tax models that have been added for this purpose are GST, PST and QST. The PDF layout will then display the tax model in the Tax Type column, and the child tax breakdown in the Tax Summary table.
If tax models are not set on the child tax codes, the Tax Type column will be blank and the Tax Summary table will be empty.
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