Tax basics
How Acctally handles VAT, sales tax, and withholding tax automatically based on your jurisdiction.
Acctally handles tax calculations automatically based on your jurisdiction. This page explains the basics without getting into accounting jargon.
What Acctally tracks for tax
Depending on your country, Acctally may track one or more of these:
VAT (Value Added Tax)
A tax on goods and services. You collect it from customers and pay it to the government, minus what you paid on business purchases.
Sales Tax
Similar to VAT but simpler. Common in the US. You collect it from customers and remit it to the state.
Withholding Tax (WHT)
Tax deducted at the source. If you pay a consultant, you may need to withhold some of their payment and send it to the tax authority on their behalf.
How it works automatically
When you select a category for a transaction, Acctally applies the tax rules based on:
- Your jurisdiction - The country/region you set up
- The category's tax profile - Standard, zero-rated, exempt, etc.
- Your VAT registration status - Whether you're VAT registered
Example:
You receive a payment of $100 for consulting in Nigeria. Acctally automatically calculates $7.50 as VAT (7.5%), records the revenue as $92.50, and tracks the VAT separately for your return.
VAT treatments
Not everything is taxed the same way. Here are the main types:
| Treatment | What it means | Example |
|---|---|---|
| Standard | Normal VAT rate applies | Most goods and services |
| Zero-rated | 0% VAT, but can claim input VAT | Exports, some food items |
| Exempt | No VAT, can't claim input VAT | Financial services, education |
| Out of scope | Not subject to VAT at all | Owner contributions, transfers |
| Reverse charge | Buyer accounts for VAT | Imported services |
Input vs. output VAT
If you're VAT registered, you track two types:
Output VAT
VAT you collect from customers on sales. You owe this to the government.
Input VAT
VAT you pay on business purchases. You can reclaim this from the government.
Your VAT liability = Output VAT - Input VAT. If you collect more than you spend, you pay the difference. If you spend more than you collect, you get a refund.
Tax profiles
Acctally uses tax profiles to define how different types of transactions are taxed. Each category can have a tax profile attached.
You don't need to create these yourself. Acctally sets up sensible defaults based on your jurisdiction:
- Standard sales (VAT at your jurisdiction's rate)
- Zero-rated exports
- Provider fees (reverse charge for international providers)
- Professional services (with WHT where applicable)
Do you need to worry about this?
For most users: no. The defaults work for typical businesses.
You might need to adjust tax settings if:
- You sell to customers in multiple countries
- You sell zero-rated or exempt items
- You import services from foreign suppliers
- You need to apply withholding tax
When in doubt, ask your accountant. Tax rules vary by country and industry. Acctally provides the tools, but tax advice should come from a qualified professional.
Next steps
Learn about Who should use review to understand the review workflow, or start recording your first payment.