Value Added Taxes (VAT)
Value added taxes are common in Europe and Canada. In certain European countries, it is a legal requirement to calculate VAT amounts based on invoice totals. This is accomplished by setting Tax-By-Line to No in Tax Rate Maintenance.
This setting by itself is not sufficient to ensure that purchase receipts and AP transactions are taxed on the order total. You must set three other fields appropriately.
Percent Recoverable
The percentage of purchase tax that can be recovered for the tax rate must be set to 100%.
Accrue Tax at Receipt
This field determines when GL entries for purchase tax amounts are created. For VAT taxes, set this to No so that GL transactions are created for tax amounts during supplier invoicing, not receipt.
Allow Tax Included
Set this field to No so that GTM does not reverse-calculate tax amounts.