Tax Configuration in Odoo ERP

In real time, tax has been incorporated in all products and services. Odoo has an effective feature to configure taxes, which helps us seamlessly while creating Sales and Purchase Orders. Let us now discuss how we can effectively manage taxes, which can be imposed on your products and services depending upon the nature of your business.

To set up your taxes, go to the Configuration menu in the Account module, click on the Taxes sub-menu.

You will see the type of taxes configured in the list view. Now, to create a new tax type, click on the “Create” button. The form will appear to enter the required fields for configuration such as, Tax Name, Tax Type, Amount, etc. Let us try to set the Tax Type as Sales, and put the Amount as 10%.

Next is to specify the distribution of invoices and credit notes. This means that we are going to distribute this particular account for an invoice in terms of selecting our chart of accounts, in which it should be reflected once you create an invoice to the customer. So, we want to have an account where any amount that is coming from Sales, which particularly belongs to tax, will be generated into that account.

Let us then change the value as 10 instead of 100, which was given by default, and select the Accounts.

The next is distribution of credit notes. This is basically used in situations where we have sold out products, and the tax has been charged into our accounts, and probably due to one reason or the other, the customer or the client had to return back the products, and need to do some refunds. In that case, there should be an account to generate the tax while doing the refund, so that we can have a balanced account. Therefore, the distribution for credit notes is when the tax is used for refund invoices. So, fill up the values at the required fields, and click on the Save button.

Here, at the Advanced Options, you are able to set the label on invoices. Then, you are able to select which tax group the tax belongs to. If you would like to include the tax into the analytical cost, you are able to enable it just by clicking on that check box. The tax amount will be assigned to the same analytical account as the invoice line. You can also include the tax in price by clicking on the Included In Price checkbox. The Effect base of Subsequent Taxes can be enabled by clicking on that checkbox, so that the total tax included becomes a taxable basis for other taxes applied to the same product.

Once the form is filled in these fields, click on the Save button. You will then see that the Tax has been created. Here, if you would like to disable or deactivate any taxes, you can click on the radio button named as Active, it will then become unavailable.

After creating the taxes, go to the Settings sub-menu which is at the Configuration menu, and then set a default tax for the company. Here, you will be able to see the Default Taxes option, and set the Sales Tax and Purchase Tax created earlier, which is applicable to all the local transactions. Let us then save the Settings by clicking the Save button.

Let us now create a new product by clicking the Products sub-menu from the Customers menu, and click on the Create button. Here, on the Product creation form, you will notice that the Tax which we had set as default for the company have been given automatically at the Customer Taxes field.

Hence, the taxes will be applicable while creating both Sales Order and Purchase Order based on the configuration.

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