In FirstBIT ERP, the functionality of group taxation is available if the Enable Tax Groups option is selected on the Administration > Settings > General Settings form.

In many countries, the government allows businesses to register as tax groups and file consolidated tax returns. For example, several entities under common ownership that use a single consolidated accounting system may be registered as a tax group and treated as a single taxable person for VAT purposes.

A tax group must include one Representative Member that will be filing VAT Returns on behalf of other (ordinary) group members.

Upon registration with the FTA, each tax group is assigned TRN (Tax registration Number) which will be also used by each group member while they are in the group. A taxable person can hold only one TRN for VAT purposes at any time period. That means that Tax Group members cannot be registered separately or as part of another tax group.

Since the date of registration of a tax group, the VAT returns are filed and VAT payments are made by the member who acts as a representative of this VAT group, that is by Representative Member.

Changes to the registered tax group are allowed : members can be added or removed, Representative Member can be replaced by another member. Members of a tax group jointly have liability for any VAT debts incurred in the period during which they were this group's members.

Creating Tax Groups

Tax Groups can be created by using the Taxes > Master Data > Tax Groups form.

You can provide a name for the group, enter the TRN, specify the date of this group registration, and add entities as its members. To be included in a tax group, the entity must be a VAT taxpayer –  make sure that the VAT Taxpayer option is selected in the entity's master record (see the Accounting > Master Data > Entities form). Also, the entity must have zero balance of its Tax Payable/Tax Receivable accounts.

To save the group, you must specify the Representative Member by selecting a check box next to a specific member.

You can create one or several tax groups. An entity can be either a separate entity not included in any group or a member of only one group.

A group composition may change over time: some existing members may quit, while new members may join. When the group must be changed, you do not need to create a new group instead, you can add or remove members.

Entity membership in a group has a start (registration) date and end date. The end date is the date of change in the group composition minus 1 day. All changes are registered in the database and can be viewed when you click the History link on the top of the form.

History of changes is important because members of a tax group are responsible for any VAT debts incurred in the period during which they were this group's members. When tax documents are prepared for a specific tax period, the system will check the membership on the document date and use the data accordingly.

Period-End Processing 

During a tax period, the VAT amounts due by each entity are accrued separately, and on the tax period end you can generate the VAT Liability Calculation  documents to learn the entity's total tax due. 

It is important to note that the Representative Member must submit a single consolidated VAT Return and VAT payment (return request) on behalf of the VAT tax group.

FirstBIT ERP automates calculation of VAT Liability for each entity and consolidation of these liabilities for the Representative Member, that is, generation of all the following documents:

• VAT Calculation Liability: To determine the VAT liability for each ordinary member. If the entity had quit the group or joined the group during the tax period, then the VAT liability is calculated only for the days of membership during the current period.  Created for each ordinary group member.
• Tax Transaction: To move the VAT liability from an ordinary entity to the Representative Member.  Created for each ordinary group member.
• Tax Transaction: To accept the VAT liability of an ordinary member by the Representative Member.  Created for each ordinary group member.
• VAT Calculation Liability: To determine the consolidated VAT liability for the Representative Member once all the VAT amounts are transferred to proper GL Accounts of the Representative Member. This document is generated last and only for the Representative member.

To automatically generate all the required documents for each tax group, you can use the Taxes > Service Tools > VAT Liability Transfer form.

Note. Review the generated documents, correct them if needed, post each of them.

Consolidating the VAT Liability

Consolidation of tax liabilities on accounts of the Representative Member is occurred as the result of posting of the tax transactions listed in the above section.

Transferring VAT liability from a group member

For a Tax Transaction that transfers the VAT amount owed to the FTA by an ordinary group member from this member, the application generates the following journal entries:

For a Tax Transaction that transfers the VAT refund amount to be received from the FTA by an ordinary group member, the application generates the following journal entries:

Accepting VAT liability by the Representative member

For a Tax Transaction that transfers the VAT amount due to FTA that must be accepted by the Representative Member from an ordinary group member, the application generates the following journal entries:

For a Tax Transaction that transfers the VAT refund amount to be accepted by the Representative Member from an ordinary group member, the application generates the following journal entries:

Then, on behalf of the entity that acts as Representative Member, you can generate a VAT Return for the current tax period by using the Taxes > Tax Documents > VAT Returns form and send it to the FTA. Also the Representative Member creates a payment to the FTA or requests a return depending on the sign of the total tax amount.