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.

Track IOSS/OSS Scheme

The IOSS (Import One Stop Shop)/OSS (One Stop Shop) scheme was introduced on 1 July 2021 to ease the taxation process for businesses that import goods from overseas into the European Union member states.

In Zoho Books, you can choose to associate customers to the OSS or IOSS scheme. Thereby, when you record an invoice or credit note for these customers, you can track the tax applied on transactions as per the OSS and IOSS scheme.

Note: Tracking the tax as per OSS or IOSS is optional in Zoho Books.

Once you start tracking OSS or IOSS scheme, you will also be able to generate dedicated reports that details the transaction type and the taxable amount.

Enable Tracking of OSS/IOSS Scheme

You have to enable tracking of OSS/IOSS scheme to track tax as per the OSS/IOSS scheme in Zoho Books. To enable tracking of OSS/IOSS scheme:

Taxes

Insight: Your EORI number is used in all custom procedures when exchanging information with customs administrations and will be displayed on the invoices you send to your customers.

You will now be able to associate customers to the OSS/IOSS scheme and track tax as per OSS/IOSS scheme while recording an invoice or credit note.

Add OSS/IOSS Tax Rates

You have to add the tax rates as per OSS/IOSS schemes in Zoho Books to apply the OSS/IOSS tax rates on your invoices and credit notes.

To add OSS/IOSS tax rates:

Taxes

You will now be able to apply these tax rates as per OSS/IOSS schemes on your invoices and credit notes.

Associate Customers to OSS/IOSS Scheme

Once you enable tracking of tax as per OSS/IOSS scheme, you can start associating customers to the OSS/IOSS scheme.

To associate customers to the OSS/IOSS scheme:

Taxes

The tax as per the OSS/IOSS scheme will be automatically applied once you create an invoice or credit note for this customer.

OSS/IOSS Scheme in Sales Transactions

The OSS/IOSS scheme is applicable only on the sale of goods and services to an OSS/IOSS scheme registered customer. You can apply tax as per the OSS/IOSS scheme on invoices or credit notes.

OSS/IOSS Scheme Report

You can view a detailed report of all the transactions raised under the OSS/IOSS scheme. Learn More.


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