> Foreign currency processing / Trading in EC countries

Trading in EC countries

When trading with customers and suppliers from EC countries, you must set up tax rates, ledgers and customer and supplier accounts to ensure correct processing of:

Supplying goods and services

When supplying goods and services to EC countries, several scenarios can apply.

To supply goods and services to VAT registered customers.

To supply goods and services to non VAT registered customers.

When customers do not supply a VAT registration number, you must charge tax on the goods supplied at the prevailing rate applicable in the country of supply.

When companies are involved in distance selling, there are three scenarios:

You want to use Sales Order Processing to print actual VAT chargeable on invoices

Set up a tax rate to apply to transactions:

VAT Return	Do not select the VAT Return check box.
EC Terms	Select Sales Goods and Related Services if you are supplying goods and there are services directly associated with the supply of the goods, for example, freight charges. charges for goods and services. Select Sales Non-Related Services if you are supplying services that do not relate to goods you are supplying.
% (tax rate)	Set at the prevailing rate in the supply country.

Set up the customer account:

Enter the relevant country code.
Leave the customer's VAT registration number blank.

The value of the goods appears in boxes 6 and 8 on the VAT Return. No EC sales list entry is required. Invoices will show the value of the goods and the value of the VAT at the rate you have specified.

Note: You also need to complete a VAT Return in the country of delivery. This must be done manually as Sage 200 does not provide this facility.

Note: For more information, refer to the documentation published by your local authority.

Consider triangulation on the EC sales list

Triangulation is the term used to describe the supply of goods between EC countries that involves three parties.

For example, a UK company receives an order from a customer in Germany. To fulfil the order the UK company purchases the goods from their supplier, based in France. The goods are delivered directly from the French supplier to the German customer.

The invoice for the goods is sent to the German customer from the UK company.

As the goods do not enter the UK, an indicator must be placed on the EC Sales list to show that the sale represents a triangulation transaction.

To mark sales as triangulated on the EC Sales list in Sage 200, you must select the Triangulated checkbox when entering the following types of transaction:

Module	Type of transaction
Sales Ledger	Invoice Free Text Invoice Credit Note Batch Invoice Batch Credit Note
Sales Order Processing	Sales Order - Full \| Delivery and Invoicing Sales Order - Trade \| Delivery and Invoicing Repeat Order Template \| Delivery and Invoicing Sales Return \| Return and Credit Quotation \| Delivery and Invoicing Pro forma \| Delivery and Invoicing Note: If you have created the sales order using Sage 200 CRM, you must amend the order in Sage 200 and select the Triangulated checkbox from the Delivery and Invoicing tab in the sales order.

Module

Type of transaction

Sales Ledger

Invoice

Free Text Invoice

Credit Note

Batch Invoice

Batch Credit Note

Sales Order Processing

Sales Order - Full | Delivery and Invoicing

Sales Order - Trade | Delivery and Invoicing

Repeat Order Template | Delivery and Invoicing

Sales Return | Return and Credit

Quotation | Delivery and Invoicing

Pro forma | Delivery and Invoicing

Note: If you have created the sales order using Sage 200 CRM, you must amend the order in Sage 200 and select the Triangulated checkbox from the Delivery and Invoicing tab in the sales order.

Accounting for VAT as a reverse charge when acquiring goods and services from EC suppliers

Note:

Reverse charge VAT is a term that covers both of the following scenarios:

Combatting the abuse of VAT legislation and preventing fraud in trade between businesses within the UK centres involving goods originating from the EC.
Accounting for VAT as a reverse charge on goods and services supplied to a UK business from an EC business.

The setup of tax rates is different in both scenarios. This topic describes setting up tax rates to account for VAT as a reverse charge on goods and services supplied to a UK business from an EC business. For information about setting up reverse charge VAT tax rates for prevention of carousel fraud, see the help topic, Reverse Charge VAT to prevent carousel fraud.

When you acquire goods and services from EC suppliers (outside the UK), you can pay the VATValue Added Tax (VAT) is applied to sales and purchase transactions in certain circumstances. These circumstances are described in the Sage 200 Accounting System Manager documentation. on the goods and services you acquire as a reverse charge, provided you are registered for VAT and the acquired goods exceed specific amounts and are for business purposes.

From a VAT perspective, you are acting as if you are both supplier and customer. This means:

EC suppliers can transfer the goods to you at a zero rate of tax and without customs control.
You declare the tax as output tax. The tax point date is the earlier of the invoice or receipt, or the 15th of the month following the month in which you received the goods. You pay this tax at the tax rate generally accepted for those goods in the UK.
Where input tax is allowable for the acquired goods, the tax for the acquisition is treated as input tax on the same VAT Return as the output tax. This cancels out the corresponding output tax, meaning that you pay no tax at all for the acquired goods.

When accounting for VAT as a reverse charge when acquiring goods and services from EC suppliers

You must:

Give your VAT registration number to your EC suppliers.
Set up a tax rate to apply to transactions:

VAT Return	Select the VAT Return check box.
EC Terms	Select Purchase Goods and Related Services if you are buying goods and there are services directly associated with the supply of the goods, for example, freight charges. Select Purchase Non-Related Services if you are buying services that do not relate to goods you are buying.
% (tax rate)	Enter the prevailing rate in your country.

Set up the supplier's account details in the Purchase Ledger with the relevant country code and their VAT registration number and default tax rate.
Apply the tax rate you have set up to appropriate acquisitions from EC suppliers (outside the UK).
Enter reverse charge VAT on your own VAT Return, effectively charging yourself VAT on the goods.

The value of the VAT appears in both boxes 2 and 4 on the VAT Return and the value of the goods in boxes 7 and 9.

Note: No nominal postings for VAT are made as the VAT element of the transaction is notional; it is self-cancelling.