Taxes

Taxes in ARE18 control how VAT (Value Added Tax) and Expanded Withholding Tax (EWT) are computed on customer invoices and vendor bills. Proper tax configuration is critical for BIR compliance — taxes drive the Sales Book, Purchase Book, SLSP, and BIR 2307 reports.

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Configuration > Accounting > Taxes

Tax Types at TBPC

TBPC uses several categories of taxes:

Category	Scope	Example
VAT Output	Customer invoices (sales)	12% VAT - Sales, 12% GOV
VAT Input	Vendor bills (local purchases)	12% VAT - Purchase, 12% S, 12% S NR
VAT Zero-Rated	PEZA-registered sales	0% Zero-Rated
VAT Exempt	Exempt transactions	0% Exempt
Expanded Withholding Tax	Vendor payments subject to EWT	EWT Sup 2%, EWT Prof 10%, EWT Contractor 2%, etc.
Final Withholding Tax	Special withholding scenarios	FWT (for specific ATCs)

Why Taxes Matter

Taxes are not just calculations — they drive several downstream effects:

1. Invoice/bill amounts — automatically compute VAT and withholding per line
2. Journal entries — post to the correct VAT Input / Output accounts
3. BIR reporting — feed the Sales Book, Purchase Book, SLSP, and VAT reports
4. Withholding tax certificates — drive the ATC codes and amounts on BIR Form 2307
5. Tax grids — classify transactions for the BIR Alpha List reports

Getting the tax configuration right means the books and BIR reports match without manual adjustment.

Tax Form

A tax record has several key sections:

Basic Information

Field	Description
Tax Name	Display name (e.g., "12% VAT - Sales")
Tax Type	Sales (for customer invoices), Purchase (for vendor bills), or None (disabled)
Tax Scope	Services, Goods, or blank (both)
Tax Computation	Percentage, Fixed, Division of, etc. — usually Percentage
Amount	The tax rate (e.g., 12.0000 for 12%)
Active	Whether the tax appears in dropdowns

Definition Tab

The Distribution for Invoices and Distribution for Refunds subsections define how the tax amount is split across accounts and tax grids.

For VAT Output (12% VAT - Sales)

Distribution for Invoices:

• 100% of tax → Account 200300 Output VAT 12% - Actual
• Tax Grids: +DT (added to the VAT Output reporting grid)

Distribution for Refunds:

• 100% of tax → Account 200300 Output VAT 12% - Actual (reversed)
• Tax Grids: -DT

For VAT Input (12% VAT - Purchase)

Distribution for Invoices:

• 100% of tax → Account 160100 Input VAT 12% - Actual
• Tax Grids: +IT

Distribution for Refunds: reversed

For Withholding Tax (e.g., EWT Sup 2%)

Withholding taxes are represented as negative percentages:

• Amount: -2.0000 (negative 2%)
• Tax Computation: Percentage of untaxed base
• Distribution: Posts to 218110 Expanded Withholding Tax - 2% (liability account)
• Tax Grids: feeds the BIR 2307 report and the MAP/QAP alphalists

The negative amount causes the withholding to reduce the amount payable to the vendor while creating a liability to BIR.

Advanced Options Tab

Field	Description
Label on Invoices	How the tax appears on printed invoices (e.g., "VAT 12%")
Tax Group	For grouping on tax totals (e.g., "VAT", "Withholding")
Include in Price	If checked, the unit price already includes the tax
Affect Base of Subsequent Taxes	For cascading taxes (rare)
Base Affected By Previous Taxes	For sequential tax computation
Country	Philippines (for l10n_ph compliance)

Philippines Tab

This tab contains Philippine-specific fields from the l10n_ph module:

• ATC Code — the BIR Alphanumeric Tax Code (e.g., WC158 for professional services)
• BIR Nature of Income — category label for reports

These fields are critical for BIR 2307 generation and the MAP/QAP alphalist reports. A withholding tax without an ATC code will not appear correctly on BIR submissions.

Common Tax Configurations at TBPC

VAT Output Taxes

Name	Amount	Account	Used For
12% VAT - Sales	12%	200300 Output VAT 12%	Standard local sales
12% GOV	12%	(gov-specific)	Government sales
0% Zero-Rated	0%	—	PEZA-registered sales
0% Exempt	0%	—	Exempt transactions

VAT Input Taxes

Name	Amount	Account	Used For
12% VAT - Purchase	12%	160100 Input VAT 12%	Standard local purchases
12% S	12%	160100 Input VAT 12%	Standard with specific treatment
12% S NR	12%	160100 Input VAT 12%	Non-resident supplier

Withholding Taxes

Name	Amount	ATC	Used For
EWT Sup 2%	-2%	WC158	Top withholding agents - suppliers
EWT Contractor 2%	-2%	WC100	Contractors
EWT Prof 10%	-10%	WC010	Professional fees
EWT Rent 5%	-5%	WC060	Rental payments

(The above are examples — refer to your actual tax list for the exact names and ATCs.)

Using Taxes on Invoices and Bills

When you add a line to a customer invoice or vendor bill:

1. Select the Product or enter a free-form description
2. In the Taxes column, select the applicable tax(es)
3. Odoo automatically computes:
   • The tax amount per line
   • The tax totals at the bottom of the invoice
   • The journal entries posting to VAT Output/Input accounts

Multiple Taxes Per Line

A line can have multiple taxes at once, for example:

• Vendor bill for professional services: 12% VAT - Purchase + EWT Prof 10%
• Result: Net amount, 12% VAT added, 10% withholding subtracted from payment

The line total shown on the bill is the net payable to the vendor after withholding.

Creating or Modifying Taxes

:::warning Superuser Operation Tax configuration directly affects BIR reporting. Never modify taxes without:

1. Understanding the impact on historical reports (BIR may flag discrepancies)
2. Consulting with the controller or BIR advisor
3. Documenting the change in the tax record's chatter
4. Testing on a staging database first :::

Creating a New Tax

1. Navigate to Configuration > Taxes
2. Click New
3. Fill in:
   • Tax Name
   • Tax Type (Sales or Purchase)
   • Amount
   • Definition: account(s) and tax grid(s)
   • Philippines: ATC code if applicable
4. Click Save

Modifying an Existing Tax

Changes take effect for new transactions. Existing posted entries are not retroactively updated — they keep the original tax calculation. This is important for BIR audit integrity.

Best Practices

• Don't delete taxes — archive them instead to preserve historical references
• Use descriptive names — include the rate, type, and purpose (e.g., "EWT Prof 10% - WC010")
• Always set ATC codes — critical for BIR 2307 and alphalist reports
• Verify tax grids — wrong grids cause wrong amounts on BIR reports
• Group similar taxes — use Tax Groups for clean invoice tax summaries
• Don't mix VAT and withholding logic — keep them as separate taxes on the same line
• Test before going live — create a draft invoice/bill and verify the computation before saving new tax records

Related Pages

• Chart of Accounts — the accounts taxes post to
• BIR 2307 — how withholding tax flows to the certificate
• BIR Tax Reports — SLSP, VAT, SAWT, Expanded reports
• Recording a Vendor Bill — applying taxes on bills
• Recording an Invoice — applying taxes on invoices