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How to set up tax codes

Tax codes in Accountability define how taxes are calculated, posted, and reported for supplier invoices, client billing, and compliance reporting. Proper setup ensures accurate VAT/GST handling, reverse charges, and statutory reporting across regions.

Tip: Why This Matters for Agencies

  • Compliance: Meet local tax regulations (e.g., VAT in France, GST in Canada).
  • Efficiency: Automate tax calculations and postings for supplier and client invoices.
  • Accuracy: Ensure correct GL postings for input and output taxes, reducing manual adjustments.

1. Navigate to SET UP FILES > Tax Codes.

2. Click NEW TAX CODE

Step 2: Enter Tax Code Details

Provide the following information:

  • Tax Code
    A short identifier (e.g., VAT20FR for 20% French VAT).

  • Description
    A clear name for the tax (e.g., VAT 20% France).

  • Tax Rate (%)
    Enter the percentage (e.g., 20 for 20%).

  • GL Accounts

    • Input Tax Account: For supplier invoices.
    • Output Tax Account: For client invoices.

  • Usage Options

    • Enable for billing (client invoices).
    • Enable for costs (supplier invoices).
    • Restrict to specific offices if needed.

Step 3: Advanced Settings

  • Reverse Charge Handling
    If applicable, set up reverse charge percentages. The system will auto-create reversing postings for cross-border services.

  • Office Restrictions
    Limit tax codes to specific offices for regional compliance.

  • Default Behavior
    Decide if the tax code should default at:

    • Office level
    • Supplier level
    • Client level
    • Override at transaction entry if needed.

Click SAVE.

Tip:  Best Practices

  • Naming Convention: Use clear codes like VAT20FR, GST10CA for easy identification.
  • Multiple Rates: Set up all required rates (e.g., 20%, 10%, 5.5%, exempt).
  • Office and Restrict to Country Fields:
    Use these fields to restrict tax codes to specific offices or countries.
    Important: You cannot use both fields at the same time. If you select one, the system will remove the previous selection and keep the most recent.
  • Tax % and Reverse Charge % Fields:
    You cannot enable both for the same tax code. If you enter a value in Tax %, the system disables Reverse Charge %, and vice versa. One must be set to 0% to use the other.
  • Compliance Prep: For regions with upcoming e-invoicing laws (e.g., France 2026), ensure tax codes align with statutory reporting needs.
  • Audit-Friendly: Use Accountability’s tax reports for reconciliation before filing returns.

Alert: Pro Tip

You can apply different tax codes on multiple invoice lines (e.g., taxable and non-taxable items) and record taxes via journal entries when needed.