Taxes improvements

It would be good to not only deal with sales taxes, but business taxes, which are calculated very differently. And to refine the existing treatment of sales taxes.

There are two very different categories of taxes - sales taxes and corporate taxes. These two taxes don't interact in most places.

Therefore it is suggested that the system offers separate settings and separete reporting functions for both sales and corporate taxes.

Suggestion 1) Separating Corporate and Sales taxes entirely

a) Separate settings sections for Corporate and Sales taxes, so that User can create different labelled categories for both tax types separately, as they are applied and calculated differently.
b) Separate entries for corporate and sales taxes on each invoice/bill.

Suggestion 2) Ability to turn off one or both taxes

Ability for User to turn off Corporate or Sales tax within their company in Settings - if one or both of those taxes are not applicable at all, or they apportion them separately later or their tax rules are too complex, to make their user experience more streamline.


Sales tax

Sales taxes are generally calculated quarterly (or monthly or annually).
The amount of sales tax paid set-off against the amount received. Or in some cases the amount paid reclaimable entiredly. There can also be exceptions (sales tax paid on items for personal use or exempt use, and part of sales tax on items used partly for personal use or exempt use).

Suggestion 3) Separating reclaimable and non-reclaimable sales tax types
Under settings for Sales taxes user has two types of sales tax they can create categories under: reclaimable and non-reclaimable.
Note, where items contain partial amounts which are reclaimable, user can apply both at lower rates to reach the result.

Suggestion 4) Localised calculation method for sales tax

Under settings User can choose how sales tax is calculated in the report, according to their local requirements:
a) adding gross sales tax from income and expenditure
b) substracting reclaimable sales tax derived from income from reclaimable sales tax from expenditure
c) substracting reclaimable sales tax paid in expenditure from reclaimable sales tax received in income,
d) only reclaimable sales tax paid in expenditure (ignoring any received).

Suggestion 5) Sales Tax periods

Under Sales tax settings User can choose whether to calculate sales tax by default weekly, monthly, quarterly, annually. Under reports they can choose which report to view also.

Suggestion 6) Sales Tax Reports layout

In Sales tax reports the report would follow the settings in suggestions 3, 4, and 5 to calculate the sales tax payable/reclaimable for the period chosen. For each period it would show separate lines for: gross sales tax received, gross paid, net gained/lost, net reclaimable (if above 0).


Business Taxes

Business taxes are usually calculated monthly, quarterly or most often annually.
They are calculated by figuring out the net taxable profit/surplus, this is done by subtracing the total reclaimable expenses from the total taxable income. Non reclaimable expenses (such as entertainments or some property expenditure) and tax-exempt income (such as donations) is ignored. The local Corporate tax rate is then applied to figure out the net tax payable.

For business taxes a User might usually create two business tax categories - an exempt tax rate of 0%, and a taxable rate set at 100%. (In some cases they might create a rate of 50%, for example for a bill they receive for an item for which they can offset 50% back against their taxable income).

Suggestion 7) Business tax settings

Under Business Tax settings the User should be able to set:

a) Their financial year end date
b) Their local relevant Tax period (annual, quarterly, monthly or custom - for example if their first financial year is longer than others).
c) Whether the business is using 'cash basis' or 'accrual basis' - in accrual basis tax will be calculated according to the date an invoice or bill was dated, in cash basis the tax will be calculated according to the date the actual payment was made or received.
d) The Corporate tax rate (or rates if there are multiple corporate taxes).
e) Taxable rate which would appear on all invoices/bills, and payments/revenue. The default would be 100% (but the user could set a different default). For example, where an item of income is tax exempt the User would choose 0% rate, and where an item of exepnditure was not tax-deductible, the User would choose 0%.
f) Unlike Sales taxes, the business tax rates would not appear on any actual receipt bill or invoice, and would not affect the price paid or received, they would simply affect how that income or expenditure was accounted for tax-wise.

Suggestion 8 Corporate tax reports

Under corporate tax reports the system could then create  reports based upon the above settings and categories:

a) It would show the taxable period as described in Suggestion 7 a) and b). But it would also be able to show a monthly or quarterly breakdown.
b) The tax would be calculated by a line displaying the figure(s) of all income marked 'taxable' (or the percentage marked taxable).
It would ignore all income marked 'exempt'.
Below that a new line would display the figure(s) of all expenditure marked 'taxable' (or percentages thereof). It would ignore all expenditure marked 'exempt'.
A further line would show the net taxable profit/surplus/loss (taxable income less taxable expenditure).
The final line would show the tax payable (tax rate applied to the line above).

Suggestion 9 Nonprofits

The User can choose in settings the change from the default and use the word 'Surplus' everywhere as a replacement for the word 'Profit', to reflect their nonprofit status.

Apologies, you have addressed accrual vs cash in your FAQ, and by providing a 'Paid' button in reports. But it would still be useful for users to set a default, as in some localities (for small businesses) cash basis is the default.

Hi Störm,

To be honest until this time we have not seen a detailed request :)

Firstly i want to say thanks for your beautiful information and beautiful feedback but we have lots of feature development and problem solving for now but don't be worry about your information because i already get my note.

Have a nice day!

Does Akaunting allow for taxes to be expressed with a decimal (like 8.25%)?