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Employee benefit

Employee benefit

Owned by Ben Catalan
Apr 10, 2024
8 min read

Employee Recharge

Employee Recharge refers to when an employer recharges its employees for certain benefits or services provided. This can have VAT implications as VAT may apply to these recharged benefits or services.

For example, employers may provide benefits such as gym memberships, parking, or health insurance to their employees and may recharge a portion of the cost to the employees. The VAT treatment depends on the specific country’s regulations and the nature of the benefit. Some benefits may be subject to VAT, while others may be exempt or have reduced rates.

Here are the recommended steps per specific scenario to comply with the local VAT rules and regulations when handling these recharges in NetSuite:

Scenario 1: Employees

Create a Vendor Bill

This is to record the expenses incurred when purchasing items from the vendor for employee benefits.

Role: Administrator

Steps:

  1. Go to Transactions > Payables > Enter Bills.

  2. Select a Vendor.

  3. Select the appropriate Expenses or Items, enter the Amount, identify, and verify the Tax Code. (The Tax Amount and Gross Amount fields are automatically calculated after a tax code is set on the line.)

  4. Set the VAT Date under the Staria Poland Localization tab.

  5. Save the Vendor Bill.

Vendor Bill GL Impact:

JPK V7 Impact:

The tax code used in this vendor bill is VAT:R1-PL.
Mapping of VAT:R1-PL in JPK V7 positions 42-43 for the procurement of goods and services.
A saved search highlighting transactions within JPK V7 positions 42-43, with a focus on the specific vendor bill associated with tax code VAT:R1-PL.

Create a Journal Entry

This is to account for the VAT output associated with each employee’s benefits. Creating this JE serves as the alternative to generating individual invoices for each employee.

Role: Administrator

Steps:

  1. Go to Transactions > Financial > Make Journal Entries.

  2. Select a Subsidiary.

  3. On the Lines subtab, add the GL accounts. There should have a Receivable account as debit and an Income account as credit per employee. On the Receivable lines, select the employee under the Entity field. On the Income account line, select the appropriate Tax Code under the VAT field, select Sales as the VAT Transaction Type under the [STA] VAT TXN TYPE, and select a VAT Output account on the Tax Account field.

Note: Reinvoices income account (credit account) should reconcile with the General Management Cost Account in the Income Statement. (The General Management Cost Account is represented on the sample Vendor Bill above showing a total of zł12,101.04)

  1. On the Staria Poland Localization tab, go to Sales Evidence Symbols field and select WEW.

  2. Set the VAT Date under the Staria Poland Localization tab.

  3. Save the Journal.

Journal GL Impact:

JPK V7 Impact:

The tax code used in this journal entry is VAT:R-PL.

 

Mapping of VAT:R-PL in JPK V7 positions 17-18 for the sale of goods and services.

 

A saved search highlighting transactions within JPK V7 positions 17-18, with a focus on the specific journal associated with tax code VAT:R-PL.

Scenario 2: External Contractor

Create a Vendor Bill

This is to record the expenses incurred when purchasing items from the vendor for the external contractor’s benefits.

Role: Administrator

Steps:

  1. Go to Transactions > Payables > Enter Bills.

  2. Select a Vendor.

  3. Select the appropriate Expenses or Items, enter the Amount, identify, and verify the Tax Code. (The Tax Amount and Gross Amount fields are automatically calculated after a tax code is set on the line.)

  4. Set the VAT Date under the Staria Poland Localization tab.

  5. Save the Vendor Bill.

Vendor Bill GL Impact:

JPK V7 Impact:

The tax code used in this vendor bill is VAT:R1-PL.
Mapping of VAT:R1-PL in JPK V7 positions 42-43 for the procurement of goods and services.
A saved search highlighting transactions within JPK V7 positions 42-43, with a focus on the specific vendor bill associated with tax code VAT:R1-PL.

Create an Invoice

External Contractors are established as customers, allowing for the creation of invoices to account for the output VAT associated with their benefits.

Role: Administrator

Steps:

  1. Go to Transactions > Sales > Create Invoices.

  2. Select a Customer (External Contractor).

  3. Add an Item that will denote the portion of the benefit that is subject to recharging to the external contractor.

  1. On the Staria Poland Localization tab, go to Sales Evidence Symbols field and select WEW.

  2. Set the VAT Date under the Staria Poland Localization tab.

  3. Save the Invoice.

Invoice GL Impact:

JPK V7 Impact:

The tax code used in this invoice is VAT:R-PL.
Mapping of VAT:R-PL in JPK V7 positions 17-18 for the sale of goods and services.
A saved search highlighting transactions within JPK V7 positions 17-18, with a focus on the specific invoice associated with tax code VAT:R-PL.

Employee Free of Charge

This refers to benefits or services provided to employees without any cost or charge to them. These benefits, when provided free of charge, may have specific VAT implications. Depending on the specific country's VAT regulations, the value of such benefits could be subject to VAT, especially if there's a direct cost to the employer for providing them. Employers need to be aware of and comply with local VAT rules when offering benefits to their employees free of charge.

Here are the recommended steps in NetSuite to comply with the local VAT rules and regulations:

Create a Vendor Bill

This is to record the expenses incurred when purchasing items from the vendor for employee benefits.

Role: Administrator

Steps:

  1. Go to Transactions > Payables > Enter Bills.

  2. Select a Vendor.

  3. Select the appropriate Expenses or Items, enter the Amount, identify, and verify the Tax Code. (The Tax Amount and Gross Amount fields are automatically calculated after a tax code is set on the line.)

  1. Set the VAT Date under the Staria Poland Localization tab.

  2. Save the Vendor Bill.

Vendor Bill GL Impact:

JPK V7 Impact:

The tax code used in this vendor bill is VAT:R-PL.
Mapping of VAT:R1-PL in JPK V7 positions 42-43 for the procurement of goods and services.
A saved search highlighting transactions within JPK V7 positions 42-43, with a focus on the specific vendor bill associated with tax code VAT:R-PL.

Create a Journal Entry

The Input VAT related to these free-of-charge employee benefits is recorded in the final expense account, which is a part of the Company’s financial records. This creation of journal entry ensures that the VAT paid is properly documented for tax reporting and compliance.

Role: Administrator

Steps:

  1. Go to Transactions > Financial > Make Journal Entries.

  2. Select a Subsidiary.

  3. On the Lines subtab, add the GL accounts. Select the particular expense account to record the Input VAT paid and two lines with pass-through accounts for debiting and crediting the employee benefit amount, effectively offsetting each other. This process is solely for the purpose of accounting for the associated output VAT. On the credited pass-through account, select the appropriate Tax Code under the VAT field, select Sales as the VAT Transaction Type under the [STA] VAT TXN TYPE, and select a VAT Output account on the Tax Account field.

  1. On the Staria Poland Localization tab, go to Sales Evidence Symbols field and select WEW.

  2. Set the VAT Date under the Staria Poland Localization tab.

  3. Save the Journal.

Journal GL Impact:

JPK V7 Impact:

The tax code used in this journal entry is VAT:R-PL.
Mapping of VAT:R-PL in JPK V7 positions 7-18 for the sale of goods and services.

 

A saved search highlighting transactions within JPK V7 positions 17-18, with a focus on the specific journal associated with tax code VAT:R-PL.

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