Managing VAT or Value Added Taxes in Cheqbook

Disclaimer: at this time Cheqbook was not originally designed to support customers outside the United States and Canada.  However, there are some foreign bank data connections available and we have many foreign users who are making it work.  This guidance is provided to help with their efforts.


VAT is a fact of life in most countries around the world and is incredibly varied in rate and rules.  Fortunately it does follow certain basic conventions.



VAT Output is the tax you're collecting on goods and services sold to your customers.  This is usually a current Liability account on your balance sheet.

VAT Input is the tax you're paying on goods and services acquired from your suppliers.  This is usually a contra-liability account often next to VAT Output on your balance sheet.  

The Net VAT is the difference between the two, which is the net amount of tax owed by your company.  This is usually reported by grouping VAT Output and VAT input together on the balance sheet to obtain a subtotal. This is intended to tax only the "value added" as the goods or services you provided were added to those you acquired.

Tax payments are usually posted in one of these two common ways:

  • Directly to VAT Output and VAT Input - This has the advantage of "closing" these balance sheet accounts immediately.  For example a payment of $75 for with a Vat Input (paid or incurred) of $25 and a VAT Output (collected or earned) of $100 would look like this journal entry:
    • Debit VAT Output $100
    • Credit VAT Input $25
    • Credit Bank or payment account $75 (reducing it's balance).
  • To an actual Net VAT Account - Another contra account to VAT Output, it is also usually grouped with VAT Input and VAT Output for presentation purposes.  For example the same entry above would simply be:
    • Debit Net VAT $75
    • Credit Bank or payment account $75.

Tax Rates or Groups often differ based on the region, the type of service or goods, or other regional factors.  For example in Switzerland in 2017 the standard VAT rate was 8%, with an additional rate of 3.8% on accommodations, as well as a 2.5% reduced rate on food and other basic needs.



A quick disclaimer here.  Cheqbook was originally built for the America market, which does not have a VAT tax, but instead a sales tax.  However it is still possible to manage your VAT tax using Cheqbook by following a few guidelines.

  • One Time Setup of General Ledger Accounts - before you do anything else, setup accounts from the Dashboard that you'll need to track your transactions.  At the very minimum we suggest the following, again using Switzerland as an example:
    • VAT Input - for all your VAT acquisitions (Current Liability)*
    • VAT Output - Standard Rate (also Current Liability for all)*
    • VAT Output - Accommodations**  
    • VAT Output - Food & Basics**
    • Then create a new subgroup called "Net VAT" and include ALL of these newly created accounts so they are grouped together on your balance sheet
    • *Your country may require separate tracking of VAT Input but most don't.
    • **The actual accounts names will vary by country and business type, you may not need all of these.  Please also consider consulting your accountant or bookkeeper if you need assistance with this.
  • VAT Input - When booking these you have to split each purchase between the goods or services received and the VAT In.  For example you purchased $312.50 of services with an 8% VAT tax of $25, for a total of $337.50, then you would follow these instructions.
    • If you're entering it directly in the register initially report the payment of $337.50 and the expense account.  AFTER you save it hit "More" to edit the transaction and split the payment between the expense account and the VAT Input account.
    • If you're entering it as a bill to be paid, use the appropriate expense account for the $312.50 of services, and separately list the expense the $25 of taxes to the "VAT Input" account.
  • VAT Output - When booking these you also have to split the sales between the goods and services sold and the VAT charged.  For example you sold $1250 of goods with an 8% VAT tax of $100, for a total sale of $1350, then you would follow these instructions.
    • If you're entering it directly in a bank account register, initially report the deposit of $1350 to your sales account.  AFTER you save it hit "More" to edit the transaction and split the deposit between the sales account and the VAT Output account.
    • If you're entering it as a customer invoice, you should use the sales tax feature built into Cheqbook to calculate the taxes for you.  This requires you first setup the taxes with rates and the appropriate expense accounts (see Taxes FAQ and the hint below for details). Once the tax types are setup you can prepare the invoices:
      • Enter the items and quantities sold, and check the "taxable" box.
      • After entering these items, select one of the previously setup tax types.  The invoice will properly calculate the tax.
      • Hint: Cheqbook only allows you to apply one type of VAT tax to your customer invoices, but you often need to charge for two. Here we recommend you setup a combined tax type. For example in addition to a standard 8% rate VAT, suppose you have an additional 3.8% Accommodations VAT for a total of 11.8%.  You would not setup the Accommodations tax as a separate 3.8% rate, since you cannot apply two taxes.  Instead setup a combined 11.8% rate account since the Accommodations VAT is always applied with the standard VAT.
  • VAT Payment - when making the payment apply it directly to the appropriate VAT Input and VAT Output accounts, or to a Net VAT account, depending on your regional custom or preference.
  • VAT Reporting - For now use the General Ledger Report for the periods and accounts you need.***

When using these methods remember to consistently apply the accounting basis to all the transactions, whether that's Accrual basis/Agreed Considerations, or Cash basis/Collected Considerations.  To properly report and pay your tax you must use the same basis for all transactions.  The company's default accounting basis on the company setup screen should also be consistent, as bills and invoices will be recorded on the general ledger according to this setting.  When making direct register entries it will be your responsibility to report using the correct basis.

***We are working on an upgrade to the general ledger to select only certain ranges of accounts.  For now you must print the whole report and save the pages you need.

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