Finance Upfront VAT

Finance Upfront VAT

Introduced in v5.20.59 - ADO 40870

Included in the licensed module Advanced VAT. 

This item provides the ability to finance upfront VAT tax in order to include a portion in the rental invoices.

When upfront VAT is assessed on a Capital lease transaction via a VAT Tax Product and a user checks the Finance Upfront Tax checkbox on Contract Explorer - Main screen - Financing and Adjustments tab, the calculated VAT amount is included in the Amount Financed of the contract as a portion of the rental payment.

There is an option in Global Settings - Pricing called "Finance Tax On Equipment." ASPIRE sets tax to financed by default if that option is set to Yes AND the user has selected a Finance Product whose Tax Product is VAT and the Tax Payment Type is Upfront Tax on Equipment Cost.

Finance Product Setup for VAT




VAT Transaction Code Setup

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Note: When contracts are created through the API, ASPIRE does NOT follow the Global Setting default setting when it is set to Yes. Therefore the user must manually select the Finance Upfront Tax checkbox if using API. 




Upon upgrading to an ASPIRE release that contains this functionality, the following accounts are added to the Capital Lease interface and an ASPIRE admin will need to assign GL account numbers to be used for each.



The Tax Payment Yield defaults to the rate set at the contract-level. 



When upfront VAT tax is assessed on a Capital lease transaction via a VAT Tax Product and a user checks the Finance Upfront Tax checkbox on Contract Explorer > Main screen > Financing and Adjustments tab, the calculated VAT amount is included in the Amount Financed on the contract as a portion of the rental payment.

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At booking, the GL interfaces for Financed Sales Tax create the following entries:
  1. DR - Financed Sales Tax Receivable
  2. CR - VAT Tran Code Credit Account (sales tax payable)
  3. CR - Deferred Income - Financed Sales Tax

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During invoicing the configuration of the VAT transaction code is followed to create proper GL activity
  1. If cash basis no entries created
  2. If accrual basis:
  1. CR - Financed Sales Tax Receivable
  2. DR - Accounts Receivable


When cash is posted to open invoices that include VAT portion the proper GL activity is created
  1. If cash basis
  1. CR - Financed Sales Tax Receivable
  2. DR - Cash
  1. If accrual basis
  1. CR - Accounts Receivable
  2. DR - Cash


During month end processing the the following entries are created for the financed VAT portion
  1. DR - Deferred Income - Financed Sales Tax
  2. CR - Earned Income - Financed Sales Tax


If a contract is placed on non-accrual the following entries are created for the financed VAT portion during month end
  1. DR - Deferred Income - Financed Sales Tax
  2. CR - Non-Accrual Earned Income - Financed Sales Tax


When posting a contract modification with the Charge Off Sales Tax Receivable contract item the follow GL activity is created
  1. DR - Financed Sales Tax Write-Off
  2. CR - Write-Off Reserve

When licensed for the module that includes the VAT deferral and financing options the following fields are available on the Accounting tab of Contract Explorer - Main screen:

Accruals of VAT are presented in the MTD, LTD and YTD buckets on this screen after earnings are processed. 
  1. Financed VAT Receivable (financed VAT amount + deferred income balance)
  2. Financed VAT Deferred Income
  3. Financed VAT Earned Income


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