Organization
Set up taxes such as VAT
Define each tax rate you charge or pay, decide whether it is added to the item's cost, and link it to its sales and purchase tax accounts.
3 min readLast updated
In this article
A tax in Rocket ERP is a named rate, such as "VAT 14%" or "VAT 15%", that you choose on items and on sales and purchase lines. The tax also tells the system where to post the amount: either to tax accounts in the general ledger, or into the cost of the item.
Before you start
Make sure your chart of accounts has an output tax account for sales and an input tax account for purchases. Your accountant usually sets these up with the chart.
Add a tax
Open Administration › Organization › Taxes.
Select Add tax.
Type the Name as you want it to appear on screens, for example "VAT 14%".
Enter the Rate (%), between 0 and 100.
Decide whether the tax is Added on cost price (see below).
If it is not added on cost, choose the Sales tax account and the Purchase tax account. Both are then required.
Add any Notes and select Save.
Added on cost price, or posted to tax accounts
Switched off (the usual case for VAT you can recover): the tax on a sale is posted to the Sales tax account as a liability, and the tax on a purchase to the Purchase tax account as a receivable from the tax authority. The item's cost does not include the tax.
Switched on: the tax is treated as part of what the goods cost you. On purchases it is added to the item's cost, so it flows into average cost and cost of sales, and no tax accounts are needed.
Edit or delete a tax
Open the row's actions menu and select Edit to change the name, rate, accounts or notes. The change applies to new documents only; posted documents keep the tax they were saved with.
Select Delete and confirm to stop using a tax. It disappears from the pickers, while past invoices keep it.
Common questions
The form will not save. With Added on cost price switched off, both tax accounts are required. Choose them, or switch the option on.
Do I need a separate tax for zero-rated or exempt goods? Yes, if you want them to show separately. Add a tax with a rate of 0 and a clear name such as "Exempt".
Where do e-invoices get their tax codes? E-invoicing has its own settings in the accounting area; the tax here provides the rate and the accounts.