UAE VAT Returns - Calculation of Standard Rated Supplies is not inclusive of credit card fees?

I record payment by credit card in undeposited funds after which I make a deposit. To account for credit card fees, I make a negative entry to equal the amount we actually receive in our bank account. 

The issue I am facing is on my VAT return, the standard rated supplies total is showing a total LESS deposit fees (instead of NET sales).

For example, although my total sales are AED 1000 and credit card fees amount to AED 3, the amount of AED 997 is appearing on the VAT return beside standard rated supplies and VAT is being calculated as 997 x 5% (instead of 1000 x 5%)

Is there any way to have the standard rated supply figure showing as NET sales?

Answer

Hello Moody,

Let me help you record the transaction properly so your VAT return will be accurate.

To record the credit card fee, you'll need to create a journal entry debiting the Bank Charge Expense and crediting the Accounts Receivable. You may have to first delete the invoice payment you've recorded previously to reopen the invoice. 

Let me guide you how, using the example you've given:

  1. Click the Plus icon and select Journal Entry.
  2. Select the journal date.
  3. Under the first row, enter the following entry: Account - Accounts Receivable A/R, Credit - Amount (AED3.00), Name - Customer name
  4. Under the second row, enter these: Account - Bank Charges expense account, Debit - Amount (AED3.00)
  5. Click Save and close.

To settle the open invoice, please follow these steps:

  1. Click Sales and then click the Invoices tab.
  2. Locate the invoice and click Receive payment under the Action column for this invoice.
  3. In the Receive payment page, make sure the invoice and the journal entry are ticked.
  4. Check the Amount received. Make sure it is the total invoice amount less the bank charge (Net amount received).
  5. Click Save and close.

When you check the VAT return, the Standard Rated Supplies total is the original amount of the invoice (AED1,000 as per your example).

Here's an article you can keep for future reference: Record Bank Charges When Receiving Payment From Customer.

Let me know if you have other questions. I'll be here to assist you.

Have a wonderful day!

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