How can I settle and pay the VAT?

Firstly: It is essential to understand the tax due through the tax report or the tax return found in the accounting reports.

Secondly: Tax Settlement
To settle the Value Added Tax (VAT), we need the existence of three accounts as follows:

1- Account for “Income VAT”.
2- Account for “Outcome VAT”.
3- Account for “VAT Under Settlement”.

Accounts number 1 and 2 are available by default in the Chart of Accounts.

A new account for account number 3 is created in the Chart of Accounts under the VAT Payable account as follows:

Liabilities > Current Liabilities > VAT Payable > Add Account

Thirdly: Settlement Entry at the End of the Declaration Period

From A/C Income VAT                 xxxx

To A/C Outcome VAT                  xxxx

To A/C VAT Under Settlement                     xxxx

Fourthly: Tax Payment journal Entry

From A/C VAT Under Settlement           xxxx

To A/C Treasury / Bank                                         xxxx