Pre-Budget Report: Changes in VAT for Adempiere Systems

You may be aware that the Chancellor announced temporary reduction in the standard VAT rate which becomes operational on 1 December 2008.

The temporary rate applies until 31 December 2009 and is 15% in stead of the current standard rate of 17.5%.

If you have a support agreement with Akuna, then we have updated your system during the evening on 24 November 2008 so that sales and purchases made after the 1st December 2008 can have the correct rate applied.

You will need to take care when processing the following transactions:

1. Credit notes: If you process a credit note after 1 December relating to before 1 December, then you must apply the 17.5% rate. As a result - both rates will be visible in the system. We will change the default rate on the 1st December 2008 and this should be closed off from use on 15 January 2009 when the 45 day window expires. After this date, all transactions must be processed using the 15% standard rate where applicable.
2. Deposits: Under the legislation, you have the option to process VAT on deposits at the reduced 15% rate prior to 1 December 2008 if you expect to supply the goods on or after 1 December 2008.
3. Transitional Provisions: If you invoiced your customer before 1 December 2008 and you expect to delivery to them after 1 December 2008, then you can reduce the VAT rate on the invoice. The correct way to process this is to credit note the customer and then re-invoice them.
4. Pricelists: where you have price lists defined including VAT, you might like to consider re-generating those pricelists to adjust for the reduction in VAT.
5. VAT Returns: Adempiere will calculate the correct VAT amount with disclosures even if the change in VAT rate occurs part way through your VAT quarter. However, you will need to ensure you apply the correct rate on invoices from 1 December 2008. Unfortunately, we cannot disable the old rate as it may be required for credit notes. Should you wish to hide the rate from certain roles, please let us know and we can update the profile permissions accordingly.
6. Overcharged VAT: If you receive an invoice after 1 December 2008 for goods or services provided on or after that date, and the supplier has charged you VAT at the old rate of 17.5%, then you are required to account for the VAT you should have been charged only, and to request a credit not for the additional VAT from your supplier.

If you have any queries, please do not hesitate to call us.