VAT have been implemented in United Arab Emirates & Saudia Arabia from January 01, 2018. The value added tax is an indirect tax and it is imposed on the goods and services those are sales & purchase. The rate of value added tax that is being charged is 5%.
Following is the step by step configurations of VAT in AX 2012 the same process is apply D365:
Step 1 you need to create the FTA vendor in the accounts payable and put the necessary information that is required to create Vendor FTA is tax authority who collect the VAT. Here i create the vendor with the name of FTA:-
Step 2 Once you create the FTA vendor next step is to create the sales tax authority General ledger>setup>sales tax>sales tax authorities.
Sales tax authorities is created with name of FTA and vendor account is mapped that we created.
Step 3 Create the sales tax settlement period: General ledger>setup>sales tax>sales tax settlement period.
You can create the settlement period monthly, quarterly or annually as per the requirement here I create the monthly period and mapped the sales tax authority:-
Step 4 Create the ledger posting groups: General ledger>setup>sales tax>ledger posting groups
Here I create the FTA ledger posting profile and mapped the necessary main account.
Use tax expense and use tax payable account is used for reverse charge mechanism
Step 5 Create the sales tax code: General ledger>setup>sales tax>sales tax code
Here I create the sales tax code with the name of Purchase Vat 5% that will be applicable on all purchase and mapped the sales tax settlement period & ledger posting group.
Create one more code for purchase reverse charge:
Step 6 Create the sales tax group: General ledger>setup>sales tax>sales tax group
Create the sales tax group with the name of Purchase vat and add the sales tax code that we created for Purchase vat and Reverse charge in the sales tax group and marked the check box of use tax against the reverse charge as shown in the screen shot.
Step 7 Create the item sales tax groups: General ledger>setup>sales tax>item sales tax group.
Item sales tax group is assign on item and tax is deducted with the combination of tax group. Here we created two tax item sale tax group one is for purchase vat and the second is for the purchase reverse.
Step 8 Invoice journal is created for Vat transaction: