VAT3 Report

The VAT Report generator uses your pre-existing Sales Tax Rates from within Xero.

If not set already, you should create sales and purchase tax rates for each tax band in each country that you are doing business. Use a zero rate for the EU country.

Intra-EU sales taxes can be automatically selected by using the following names in the tax components within Xero

1. All sales of goods to the EU use E1
2. All sales of services to the EU use ES1
3. All purchases of goods from the EU use E2
4. All purchases of services from the EU use ES2

View the Parolla Tools sales tax generator for a full set of example sales tax rates.

Invoice Basis or Monies Received Basis

You can choose the basis for both sales and purchase transactions. This can be used to check if the generator is working correctly for your organisation. Compare the generator in both Cash and Accrual methods against the Xero Sales Report before deciding if you will run the generator under a monies received basis report. To create a monies received basis report set the sales basis to cash and the purchases basis to accrual.

Note that you should not directly compare common Tax Rates such as "No Tax" or "Tax Exempt", or any other Tax Rate which is used in both sales invoices and purchase bills. This is because the Tax Rate gross and net values generated in the Xero Sales Report will be a mixture of sales and purchase transactions calculated by using the same method. Either accrual or cash basis method.

Under the monies received basis the VAT3 generator will contain some transactions where the sales are calculated via cash receipt method, while the purchases are calculated via accrual method. This will result in a different total value when compared against the Xero Sales Report values.

Instructions

The VAT Report generator uses your pre-existing Sales Tax Rates from within Xero, preferably set with tax component codes.

1. The button at the top of this page will direct you to the Xero login screen where you will be authenticated with Xero.
2. Xero will then ask you to give permission for Parolla to access your Xero data. Choose the organisation that you wish to run the reports for and confirm access.
3. You will be redirected back to the Parolla report select details page.
4. Confirm your method of calculating sales transactions, cash basis or accruals.
5. Choose your VAT reporting frequency.
6. Choose the date range that the report should cover. Note that the start date and end dates are inclusive. So set the end date as the last day of the chosen period.
7. Select any taxes that are Goods EU VAT taxes.
8. Select any taxes that are Services EU VAT taxes.
9. Click Submit to run the report.
10. Download the ROS inline XML file if required.

Tax Code Warnings

You can check your transactions for possible errors in their selected vat rate types.

For instance, if an invoice line item has been coded as a purchase tax type then you will see an error triangle in the details tab. Hover over the icon to get an explanation of the possible error.

To make use of this feature you should set your tax rates up as follows:

1. Go to your Xero tax rate settings sceen under Settings > General Settings > Tax Rates
2. Select a tax rate to edit.
3. Make sure you only have one Tax Component in the tax rate.
4. For a sales tax, include the word 'sale' or 'sales' in the tax component name.
5. For a purchases tax, include the word 'purchase' or 'purchases' in the tax component name.
6. Words can be any combination of upper or lower case.
7. If the component name contains both words, or neither, then the tax code will be take as bi-directional.