Set up advanced tax rates for invoices

With Yokoy Invoice, you can flexibly configure tax rates with multiple components to respond to the requirements of companies operating in multiple countries. For example, in some countries, taxes may be divided into multiple levels, such as federal, state, or local. Each of these levels may have distinct tax rates or rules, requiring companies to account for and apply different tax components based on the jurisdiction.

Yokoy Invoice’s advanced tax rate configuration allows you to manage these various components within a single tax rate, ensuring accurate calculations that comply with each jurisdiction’s specific tax regulations.

The standard tax rate setup used for expenses doesn’t cover these complex scenarios.

With advanced tax rate configuration, businesses can handle specialized tax situations such as self-assessed taxes. In some countries or scenarios, businesses may need to self-assess taxes instead of being charged directly by a supplier. Yokoy Invoice can configure this tax type to ensure compliance with such requirements.

You can mark certain taxes as non-deductible, meaning the business cannot reclaim them as input tax credits. This is particularly useful in situations where certain goods or services are subject to non-reclaimable taxes, which need to be recorded accurately in the accounting system.

Overall, this advanced tax configuration option helps businesses ensure that their VAT and tax calculations are accurate, compliant with local regulations, and tailored to their specific operational needs.

Enabling tax rate components for invoices

👤 Yokoy admin role with Invoice settings permission required.

To enable advanced tax rate configuration for invoices:

Go to Admin > Invoice settings.
Turn on the Enable tax rate components toggle.

Once the toggle is enabled, the advanced Tax/VAT rates configuration section, Configure tax rate components, appears for new and existing VAT/tax rates (Admin > VAT /Tax rates).

If you do not enable the Configure tax rate components for invoices option, then the standard VAT/Tax rate setup is used.

The standard VAT / Tax rate setup contains the Tax category field, which will be used in the future to determine tax, enhancing the automatic assignment of tax rates to invoices during invoice upload. However, currently this field is for information purposes only.

If advanced tax rate components are not enabled for a tax rate, the line item totals displays the name of the tax rate.

Calculating invoice line item amounts with advanced tax components

When advanced tax configuration is enabled for the legal entity, there are two additional columns: self-assessed tax amount and non-recoverable tax amount. For more information, see Calculating invoice line item amounts.

Self-assessed and non-recoverable taxes (if set for that tax rate) are calculated automatically for each line item where that tax rate is applied.

You can click on the line tax amount to display a pop-up window with more information about the calculated tax components.

Setting up tax rate components

If Configure tax rate components for invoices is enabled, you see an additional Tax rate components section where you can set up advanced tax rate configuration.

Depending on the requirements of the tax jurisdiction, you can set up one or multiple tax components. For example, in Europe a single tax component is usually used, whereas in countries such as Canada (with GST and provincial taxes), India (with CGST, SGST, IGST), USA (state, county, city taxes), and others, multiple tax components can be part of a single tax rate.

You must enter at least one tax component for the tax rate to save.

🚧 Warning

Currently, tax rate components included in invoices can only be retrieved through the Yokoy API only. Other integrations do not support these tax components.

Tax rates with components can be created via Yokoy API, CSV import file, and manually.

To set up an advanced tax rate configuration, in addition to the standard tax rate fields, you need to fill out these fields:

Field	Required / Optional	Description
Name	Required	Describe the type of the tax component (e.g. VAT, GST, PST, QST, sales tax, use tax, etc.) This value is used in the Totals section of the invoice line items to provide an aggregated value for the different tax types per invoice, ensuring transparency in the amount of each tax type (e.g., VAT, GST) that is applied. This is particularly important in countries or regions where multiple tax types can apply to a single invoice.
Assessment type	Required	Indicates the entity with which responsibility lies for calculating, reporting, and remitting tax. In the context of invoices, the two common tax assessment types are: Supplier-assessed tax: this is the most common scenario where the supplier is responsible for calculating and including the tax on the invoice. The tax is assessed at the point of sale, and the supplier collects it from the buyer and remits it to the tax authorities. Self-assessed tax: in this case, the supplier issues the invoice without including any tax or includes only one tax component. For example, in Canada, only GST may be included, while QST must be self-assessed. The buyer is responsible for calculating, reporting, and remitting the missing tax components to the tax authority instead of the supplier. This is often applicable for cross-border transactions or in scenarios where the reverse charge mechanism applies. Depending on the selected assessment type, the line item tax amount is either displayed in the Tax field or the Self-assessed tax field. The Self-assessed tax field is only available as a selectable column when the Enable tax rate components option is activated. The column is hidden by default.
Rate (%)	Required	The percentage rate imposed for the tax rate component. You can enter rates of up to four decimal places. This is a required field for supplier-assessed and self-assessed tax components: Supplier-assessed tax: provide the percentage to be found on the invoice, as calculated by the supplier. Self-assessed tax: provide the percentage that must be self-assessed by the customer. The Total VAT/Tax rate field is automatically populated with the aggregated value of all supplier-assessed tax rate components. Negative rates are permitted for each tax rate component; however, the cumulative value of all supplier-assessed tax rate components cannot be less than zero.
Recoverability (%)	Required	Refers to the portion of a tax amount that a business can recover from the tax authority. The default value is 100%. Allows values between 0 and 100%. It is used to calculate the amount of non-recoverable tax for each invoice line item. The Non-recoverable tax field is only available as a column when the 'Enable tax rate components' option is activated in the Invoice settings. The column is hidden by default.
Input tax account	Optional	Used for integration purposes to post invoices. Here you should enter the GL account that tracks the tax paid on purchases and expenses incurred by a business. This account enables businesses to reclaim these taxes from tax authorities, effectively reducing their overall tax liability. When tax rate components are used, you don‘t need to enter a value for Account (ERP) field as it is replaced by the Input tax account field within the tax rate component. If you use the same VAT/TAX rate is used for both expenses and invoices, you need to enter a value in the Account (ERP) field, as it is used in expenses.
Output tax account	Optional	Used for integration purposes to post invoices. Here you should enter the GL account that is used to record the output tax that the business must self-calculate and remit to tax authorities when it receives invoices that don‘t include tax (i.e.g in cross-border transactions or reverse charge scenarios).
Tax expense account	Optional	Used for integration purposes to post invoices. Here you should enter the GL account that records tax expenses incurred by a business that are non-recoverable. This includes taxes paid on purchases and expenses for which the business cannot reclaim input tax from tax authorities.