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:

• Go to Settings > Taxes > Tax Rates.
• Click the + New Tax button on the top right corner of the page.
• Fill in the Tax Name and the Rate (%) at which it’s levied.
• Mark the option This tax is a compound tax, if this is a tax that is calculated on top of a primary tax.

• If you had chosen to track taxes under seperate accounts, you can choose to track taxes under a single account by clicking Edit.
• Select Track taxes under a single account.
• Click Save.

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.

Transactions

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

Edit Tax Rate

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

• Go to Settings > Taxes > Tax Rates.
• Hover over the tax and click Edit.
• After making the necessary changes, click Save.

• If this tax has already been applied in some transactions, you will be asked to confirm if you wish to update the new tax rate in those transactions as well.

Delete Tax Rate

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

• Go to Settings > Taxes > Tax Rates.
• Hover over the desired tax and click the Trash icon.
• Click OK to confirm.

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:

• Go to Settings > Taxes > Tax Rates.
• Click the + New Tax Group button in the top right corner of the page.
• Enter the name of the tax group, and select the taxes you want to associate with this tax group.
• Click Save.

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:

• A single account
• Separate accounts

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 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.

To start tracking taxes under separate accounts:

• Go to Settings > Taxes.
• Select the Tax Settings tab.
• Select Track Taxes Under Separate Accounts.

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:

• Go to Settings > Taxes > Tax Settings.
• Enable the Track VAT MOSS and sale of digital service to overseas customers option.
• Click Save.

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:

• Go to Settings > Taxes > Tax Rates.
• Click the + New Tax button on the top right corner of the page.
• Fill in the Tax Name and the Rate (%) at which it’s levied.
• Mark the option This tax will be applicable only during the sale of digital services to overseas customers.
• Select the Country to which you’re selling your digital services.
• The Account to Track Tax would be VAT MOSS Payable by default. Click the pencil icon next to it to change the account.

• Only accounts with the Account Type as Overseas Tax Payable will be listed here. You can create a new account with this Account Type to track this tax.
• Select the desired account, and click Save.

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