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Report VAT to Tax Authorities

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This topic describes the reports in Business Central that you can use to submit information about value-added tax (VAT) amounts for sales and purchases to tax authorities in your region. Depending on the specific country/region, the reports may include specific information, or there might be additional reports that you must submit. Check the articles for your country/region in the Local Functionality section.

You can use the following built-in reports:

  • The EC Sales List report

    The European Community (EC) Sales List report lists the value added tax (VAT) amounts that you have collected for sales to VAT-registered customers in the European Union (EU) countries/regioins.

  • The VAT Return report

    The VAT Return report includes VAT for sales and purchases to customers and from vendors in all countries/regions that use VAT.

In both cases (as in other VAT-related reports), VAT is calculated based on the VAT posting setup and the VAT posting groups that you have set up. Business Central shows VAT entries always based on their VAT Date as a primary reporting date.

Note

All VAT related reports now run using the VAT Date to filter relevant records. Even if you set up VAT Date Usage as Do not use VAT Date functionallity Business Central will hide all instances of the VAT Date across the application. However, the VAT Date is still used in all reportings and is auto-populated with the Posting Date.

If you want to view a complete history of VAT entries, every posting that involves VAT creates an entry on the VAT Entries page. These entries are used to calculate your VAT settlement amount, such as your payment and refund, for a specific period. To view VAT entries, choose the Lightbulb that opens the Tell Me feature 1. icon, enter VAT Entries, and then choose the related link.

Note

Each Business Central environment is meant to handle regulatory reporting in one single country/region. For example, the Dutch version of Business Central handles VAT reporting in The Netherlands but not in other countries/regions. Similarly, the United States version of Business Central handles 1099 reporting in the United States and does not support claiming VAT reporting in other countries/regions, unless brought by an extension delivered by our partner ecosystem or a customer-specific code modification.

About the EC Sales List report

In the European Union (EU) and in the UK, all companies that sell goods and services to VAT-registered customers, including customers in other European Union (EU) countries/regions, must submit an electronic version of the European Community (EC) Sales List report to their customs and tax authorities. The EC Sales List report works only for countries/regions in the EU.

The report includes one line for each type of transaction with the customer, and displays the total amount for each type of transactions. There are three types of transactions that the report can include:

  • B2B Goods
  • B2B Services
  • B2B Triangulated Goods

B2B goods and services specify whether you sold a good or a service, and are controlled by the EU Service setting in the VAT posting setup. B2B Triangulated Goods indicate whether you engaged in trade with a 3rd party, and are controlled by the EU 3-Party Trade setting on sales documents, such as sales orders, invoices, credit memos, and so on.

After the tax authority reviews your report, they will send an email to the contact person for your company. In Business Central, the contact person is specified on the Company Information page. Before you submit the report, make sure that a contact person is chosen.

Submit an EC sales list report

To submit an EC sales list report, go to the EC Sales List Reports page, and then choose the New action. In the EC Sales List Report page, specify the period and other required fields. Then choose the Suggest Lines action. Business Central checks your VAT entries to calculate the suggested lines for the report. Once you're ready to submit, you must first release the report, and then submit the report.

About the VAT Return report

Use this report to submit VAT for sales and purchase documents, such as purchase and sales orders, invoices, and credit memos. The information in the report is in the same format as on the declaration form from the customs and tax authorities.

For the VAT return, you can specify the entries to include:

  • Submit open transactions only, or open and closed. For example, this is useful when you prepare your final annual VAT return.
  • Submit only entries from the specified periods, or also include entries from previous periods. This is useful for updating a VAT return that you have already submitted, for example, if a vendor sends you a late invoice.

To connect to your tax authority's web service

Business Central provides service connections to tax authority websites. For example, if you are in the UK, you can enable the GovTalk service connection to submit the EC Sales List and VAT Return reports electronically. If you want to submit the report manually, for example by entering your data on the tax authority's website, this is not required.

To report VAT to a tax authority electronically, you need to connect Business Central to the tax authority's web service. This requires that you set up an account with your tax authority. When you have an account, you can enable a service connection that we provide in Business Central.

  1. Choose the Lightbulb that opens the Tell Me feature 2. icon, enter Service Connections, and then choose appropriate link.

  2. Fill in the required fields. Hover over a field to read a short description.

    Note

    It is a good idea to test your connection. To do this, choose the Test Mode check box, then prepare and submit your VAT report as described in the To prepare and submit a VAT report section. While in Test Mode, the service tests whether the tax authority can receive your report, and the status of the report will indicate whether the test submission was successful. It is important to remember that this is not an actual submission. To submit the report for real, you must clear the Test Mode check box, and then repeat the submission process.

To set up VAT reports in Business Central

  1. Choose the Lightbulb that opens the Tell Me feature 0. icon, enter VAT Report Setup, and then choose the related link.

  2. To let users change and resubmit this report, choose the Allow Modification field.

  3. If the tax authorities require that you submit VAT reports that also include the net amount that was used to calculate VAT, choose the Report VAT Base field.

  4. Choose the number series to use for each report. Hover over a field to read a short description.

  5. In supported countries/regions, to set up VAT return periods, fill in the Report Version and Period Reminder Calculation fields in the Return Period section.

    In countries/regions where VAT return periods are required by the tax authorities, such as the UK, you must fill in additional fields as well. Hover over a field to read a short description. However, in the British version, this section has the name Making Tax Digital.

  6. If your company is part of a VAT group, then specify your role. For more information, see The VAT Group Management Extension

To set up VAT return periods

Optionally, if your business is not located in the UK, use the VAT Returns Periods page to set up scheduled VAT returns. if your business is located in the UK, see Making Tax Digital in the United Kingdom.

  1. Choose the Lightbulb that opens the Tell Me feature. icon, enter VAT Return Periods, and then choose the related link.
  2. On the VAT Return Periods page, fill in the fields to set up the first period. Hover over a field to read a short description..
  3. Repeat step 2 for any additional periods that you want to add.

Now, when the time has come to submit a VAT report for a VAT return period, choose the period in the VAT Return Periods page, and then choose the Create VAR Return action. Then, in the VAT Return card, choose the Suggest Lines action as described in step 3 in the following procedure.

To prepare and submit a VAT report

  1. Choose the Lightbulb that opens the Tell Me feature 3. icon, enter EC Sales List or VAT Return, and then choose the related link.

  2. Choose New, and then fill in the required fields. Hover over a field to read a short description.

  3. To generate the content of the report, choose the Suggest Lines action.

    Note

    For the EC Sales List report, you can review the transactions included in the report lines before you submit the report. To do that, choose the line, and then choose the Show VAT Entries action.

  4. To validate and prepare the report for submission, choose the Release action.

    Note

    Business Central validates whether the report is set up correctly. If the validation fails, the errors display under Errors and Warnings so that you know what to fix. Typically, if the message is about a missing setting in Business Central, you can click the message to open the page that contains the information to correct.

  5. To submit the report, choose the Submit action.

After you submit the report, Business Central monitors the service and keeps a record of your communications. The Status field indicates where the report is in the process. For example, when the authorities process your report, the status of the report changes to Succeeded. If the tax authority found mistakes in the report you submitted, the status of the report will be Failed. You can view the errors under Errors and Warnings, correct them, and then submit the report again. To view a list of all your EC Sales List reports, go to the EC Sales List Reports page.

VAT return statuses

VAT returns can have different statuses, as described in the following table.

Status Description
Open When you create a new VAT return. You can run the Suggest Lines action. If you need to correct values, you can run the Suggest Lines action again. You can't submit a VAT return that has this status.
Released Status will be changed when you use the Release action. Business Central will show the Errors and Warnings FastTab. You can't make changes or use the Suggest Lines action. To make changes, you must reopen the VAT return.
Rejected If your submission was not successful (for example, if authentication failed), the status will change to Rejected. You can't reopen a VAT Return that has this status.
Submitted The VAT return is submitted using the Submit action, or it's marked as submitted by using the Mark as Submitted action.
Accepted The VAT return has this status if the report is marked as acceptec by using the Mark as Accepted action. If the VAT Return report is marked as Accepted, you can run the Calculate and Post VAT Settlement action.

Viewing communications with your tax authority

In some countries/regions, you exchange messages with the tax authority when you submit reports. You can view the first and the last message you sent or received by choosing the Download Submission Message and Download Response Message actions.

Submitting VAT reports manually

If you use another method to submit the report, for example by exporting the XML and uploading it to a tax authority website, afterward you can choose Mark as Submitted to close the reporting period. When you mark the report as released, it becomes non-editable. If you must change the report after you mark it as released, you must reopen it.

VAT settlement

Periodically, you must remit the net VAT to the tax authorities. If you need to settle VAT frequently, you can run the Calc. and Post VAT Settlement batch job to close the open VAT entries and transfer purchase and sales VAT amounts to the VAT settlement account.

When you transfer VAT amounts to the settlement account, the purchase VAT account is credited, and the sales VAT account is debited with the amounts calculated for the specified period. The net amount is credited or debited, if the purchase VAT amount is larger, to the VAT settlement account. You can post the settlement immediately or print a test report first.

Note

When you use the Calc. and Post VAT Settlement batch job, if you do not specify a VAT Bus. Posting Group and a VAT Prod. Posting group, entries with all business posting groups and product posting group codes are included.

Configuring your own VAT reports

You can use the EC Sales List report out-of-the-box. However, you can also create your own reports, if you have a development license so that you can create codeunits. If you need assistance, contact a Microsoft Partner.

The following table describes the codeunits that you must create for your report.

Codeunit What it must do
Suggest Lines Fetch information from the VAT Entries table, and display it in lines on the VAT report.
Content Control the format of the report. For example, whether it is XML or JSON. The format to use depends on the requirements of your tax authority's web service.
Submission Control how, and when, you submit the report based on the requirements of your tax authority.
Response Handler Handle the return from the tax authority. For example, it might send an email message to your company's contact person.
Cancel Send a cancellation of a VAT report that was submitted earlier to your tax authority.

Note

When you create codeunits for the report, pay attention to the value in the VAT Report Version field. This field must reflect the version of the report that is, or was, required by the tax authority. For example, you might enter 2021 in the field to indicate that the report conforms to the requirements that were in place that year. To find the current version, contact your tax authority.

See also

Set Up Calculations and Posting Methods for Value-Added Tax
Work with VAT on Sales and Purchases
Set Up Sales
Invoice Sales

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