Sales invoice tax rules must be set up if you are using Envoice to create and send sales invoices. If sales invoices are created in your accounting software and Envoice is only used to forward sales invoices to customers, you do not need to set up sales invoice tax rules.
Tax rules must be set up so that sales invoices created in Envoice are reflected correctly in accounting software entries and reports. The correct tax rate is applied according to whether goods or services are sold and whether they are sold to the local market, the EU internal market, or outside the European Union.
Products and services are grouped here based on the sales tax rate and the sales revenue account. For example, if a company sells products only in Estonia with a single sales tax rate and their sales revenue is also recorded in accounting on only one account, then one rule must be set up. However, if all products are sold in Estonia, but the sales revenue of food products and consumer goods is distinguished at the level of the general ledger accounts, then two rules must be set up.
Once you've set up the tax rules, they will automatically be applied when you create a new sales invoice. The correct rule will be selected based on the customer's location and the item you are selling.
Creating and Editing Sales Tax Rules
- Start by navigating to Settings > Bookkeeping > Tax rates.
- Find the tax code for which you want to create a sales tax rule and click on the Edit button (pencil icon) at the end of the row. If the desired rate is not available, you can click on "Add new" to create a new VAT rate.
- In the "Tax rules for sales invoices" section, click on "Add Row."
- Select "Selling what?" - Choose whether the rule applies to the sale of a product or a service.
- Select "Selling where?" - Choose between Local, EU, or Outside EU.
- Choose the "Sales Revenue Account" - Select the account to which the sales revenue for this rule will be posted.
- Enter a "Rule Name" - Provide a short description that will be displayed in the sales invoice settings when setting up goods/services for sales tax.
Please note that you can also add a new sales tax rule directly when creating a sales invoice by using the "Add New Sales Tax Rule" block in the invoice rows.