Recoverable Taxes
Taxes are recoverable whenever your company is eligible to offset a percentage of tax on purchases against tax collected on sales. Recoverable taxes are common in Europe.
The following settings in Tax Rate Maintenance govern setup of recoverable taxes.
Percent Recoverable
The percentage of purchase tax that can be recovered for the tax rate.
AP Tax Accounts
GL account and sub-account for posting recoverable tax amounts for invoices and credit notes. These accounts are used also by Purchase Order Receipts (5.13.1) and PO Shipper Receipt (5.13.20).
A recoverable tax is an asset when debited for recoverable purchase and AP taxes, or a liability when treated as a contra account to sales tax payable. The system uses the accounts associated with the applicable tax rate, if specified; otherwise, defaults in Domain/Account Control are used, but you can override them.
Accrue Tax at Receipt
Determines when GL entries for purchase tax amounts are created. For recoverable taxes, set this to No because the tax point is not receipt of goods, but receipt of supplier invoice.