VAT/GST determination updates

November 1, 2023

As of November 1, 2023, Avalara is making the following enhancements to VAT/GST determination.

Rate type

New tax name data and categorization for VAT-exempt and nontaxable transactions. You’ll notice two new rate types for VAT/GST transactions:
- Exempt (E)
- Outside Scope (O)

These new rate types are added to the current rate types: Standard (S), Reduced (R ), and Zero (Z).

The taxable amount for transactions will be categorized as Exempt (E) in the "Exempt" field and for those marked as Outside Scope (O) in the "Nontaxable" field.

AvaTax responses provide improved tax naming to align with each country's indirect tax terms, such as VAT, GST, and JCT.

Inventory transfer followed by domestic supply use case

Avalara is enhancing the Avalara AvaTax VAT/GST determination solution to support more complex calculation logic and content for a supply of goods to a customer (B2B or B2C), where the goods move from country A to country B and where the seller acts as importer of record in the destination country.

Given the goods move from country A to country B and the seller acts as importer of record in the destination country, we understand that this supply chain may involve two VAT/GST transactions:

Transaction 1: Movement of goods (or transfer of inventory) from Country A to Country B. If you are the seller and want to calculate VAT on the movement of goods (or transfer of inventory) you will need to send AvaTax this transaction using the following document types:
- “InventoryTransfer Outbound” if you intend to calculate VAT on the outbound movement of goods from Country A to Country B
- “InventoryTransfer” if you intend to calculate VAT on the inbound movement of goods to Country B from Country A Availability depends on your financial system's capability to handle such cases.

Transaction 2: Sale of goods to customer in Country B. If you're the seller and need to calculate VAT on the sales invoice, use the "Sales Invoice" document type.
Note: This won't provide tax details for the origin country regarding outbound goods movement.; i Instead, use "Transaction 1" for domestic supplies in Country B.

No immediate action is required of you unless you are currently consuming the origin tax detail incoming from the Sales Invoice in this use case. For more information, contact your account manager.