The VAT3 reports page is being reworked and updates made to the csv output. This work is currently down the priority list while we deal with COVID subsidy schemes.
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
View the Parolla Tools sales tax generator for a full set of example sales tax rates.
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.
The VAT Report generator uses your pre-existing Sales Tax Rates from within Xero, preferably set with tax component codes.
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: