Taxes

Taxes are an integral part of any business. The taxes applicable to your business are determined by your business’s location and type. In Zoho Books, there are country specific taxes, multiple tax rates, and tax groups that you can configure according to your business’s needs.

Tax Rates

In this section, you can create the tax rates that are applicable for your business based on the goods and services that your business deals with.

Add Tax Rate

To create a new tax rate:

New Tax Rate

Insight: Compound Tax: In some countries, you might have to collect more than one tax from your customers. One tax could be for you to pay to your local province and another to a different tax authority, say, federal authority. In such cases, the provincial tax is applied on the total that includes the item or invoice amount as well as the federal tax amount. Such taxes are called as Compound Taxes.

New Tax Rate

After you create a new tax, you can associate it to your items or apply it when creating a transaction.

Items

A default tax rate can be set for an item in Zoho Books. Doing so, the next time you create a transaction for this item, its set tax rate will be shown automatically.

Item Tax

Transactions

The tax rates for different items can be changed at the transaction level.

Invoice Tax

Edit Tax Rate

You can make changes to any tax rate that you have added in Zoho Books. Here’s how:

Edit Tax Rate Edit Tax Rate

Warning: Editing the tax rates will update them in active recurring profiles you had created as well.

Delete Tax Rate

You can delete any tax rate that you have created in Zoho Books. Here’s how:

Delete Tax Rate

Tax Groups

You can group more than two taxes together and apply it on your transactions. Let’s say you have to charge your customers a newly introduced cess rate, you can then create a tax group with your regular tax rate and the cess to apply them on your invoices.

The total tax rate of a tax group will be the sum of all the tax rates which are grouped under it. To create a tax group, you must ensure you have created two or more tax rates.

To create a new tax group:

New Tax Group

Insight: To edit or delete a Tax Group, follow the same steps as editing or deleting a Tax Rate.

Tax Settings

In Zoho Books, you can configure how the taxes should be tracked. Let’s take a look at them.

Track Tax Account

The taxes that are applied under your sales and purchase transactions can be tracked under:

Track Taxes Under A Single Account

The taxes applied on your sales and purchase transactions will be tracked under a single account. By default, these taxes will be tracked under the Tax Payable account.

Track Taxes
Track Taxes Under Separate Accounts

If you would like to track the taxes applied to your sales and purchase transactions under different accounts, you can do so. The taxes applied on the sales and purchase transactions will be tracked under the Output Tax and the Input Tax accounts respectively.

Insight: The setting will be applicable for other Zoho Finance applications as well. 

To start tracking taxes under separate accounts:

Track Taxes

Insight: If you have chosen to track taxes under seperate accounts, you can choose to track taxes under a single account while creating a new tax or editing an existing one.

Track Tax on Digital Services

If your business provides digital services to overseas customers, the tax rates will vary based on the place of supply. In Zoho Books, you can track the tax applied on the sale of digital services (such as software or cloud services) that your business offers.

To enable this option:

Taxes

By default, the taxes that are applied on the overseas sale of digital services are tracked under the VAT MOSS payable account. You can change it when creating a new tax. Here’s how:

Taxes

Insight: You can track the sale of digital services to the EU Member States using the VAT MOSS report and track digital services export using the Overseas Digital Tax Summary report.

Warning: You will not be able to change the accounts for transactions that have already been associated with a tax rate.


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