How to Configure Taxes in Odoo

The world has changed significantly over the last few years, and business owners have had to adapt to it. Odoo, initially just a simple accounting tool for small businesses, has evolved over time to become a major force in the software industry. It’s been used by millions of people worldwide, helping them streamline their businesses, save time and money, and increase efficiency.

Odoo supports a lot of taxes, and its comprehensive reporting tools make sure that your business gets a substantial amount of tax deductions. Odoo’s tax engine is compatible with all sorts of uses and calculations, including VAT, FICA, GST, VAT for employees or for goods sold to customers.

This article will look at How to configure taxes in Odoo with just 4 quick and simple steps. So, let’s get right into it.

Table of Contents

• How important is accuracy when it comes to handling taxes?
• How to Configure Taxes in Odoo
  • Step 1. Activate Sales Taxes
  • Step 2. Set up Basic Options
  • Step 3. Set up Definition Tab
  • Step 4. Configure Advanced Options Tab
• Final Thoughts

How important is accuracy when it comes to handling taxes?

The importance of accuracy when we are dealing with taxes cannot be taken lightly. The records you create will serve as the foundation for your financial statements and other reports, which means that they will need to be kept on-base perpetual records. For example, in order to submit a tax return, you will need to maintain a record of all income earned during the year, along with any expenses incurred by the company.

If your goal is to keep tax time as painless and with as little stress as possible, it is important that you have a solid understanding of basic record-keeping principles and guidelines. Without good record-keeping skills, however, tax time may prove to be a challenge. Lucky for you, with Odoo, all of these processes are relatively easy and quick, which will save you lots of time and effort dealing with tax personally.

How to Configure Taxes in Odoo

Step 1. Activate Sales Taxes

Before you can actually move on to configuring your taxes in Odoo, you will first need to activate your sales taxes. This can be easily done from the List view, included as a section of your Fiscal Localization Package. For this reason, the majority of the sales taxes in your country would already be pre-configured within the database of your company.

That said, only some of them come already activated beforehand, which is why you also have the option to activate only the taxes that are necessary for your company. So, in order to activate the Sales Taxes, you need to head to Accounting and look for Configuration. Then, scroll down to the Taxes section and then click on the Activate toggle button in order to activate your tax. You can follow the same steps to deactivate any unused tax.

Step 2. Set up Basic Options

After you are done with activating your sales taxes in the List view, then we can move on to the next step. For the second step, you will need to set up the basic options to configure your taxes in Odoo.

If you want to create a new Tax, you will first need to find Accounting and click on configuration. Then, scroll down to Taxes and then choose Create. And if you need to edit an old tax, follow the same steps. But for the last step, you should open the tax you want to modify instead of clicking on Create.

One thing to keep in mind is that there are different labels for the taxes. There are three labels of taxes, each with its own special uses - Tax Name, Label on Invoice, and Tax Group. We will go over these labels, as well as some other Basic Options needed in order to configure taxes on Odoo.

Tax Name

Tax Name is what will be shown to backend users. The Tax Name will also be the one you work with when you modify Invoices, Products, and Sales Orders, etc.

Label on Invoice

Label on Invoice is nothing other than the label of your tax, which is shown on each of the invoice lines within the column of Taxes. Contrary to Tax Name, Label on Invoice is, in fact, the label shown to front-end users. This will appear on Customer Portals, exported invoices, etc.

Tax Group

For Tax Group, you will need to select which one your tax belongs to. The name of the Tax Group will be visible just above the Total line of the exported invoices, as well as the Customer Portals. The tax groups will come with different repeated processes of the same tax. Because of this, it may come in handy when you need to record the same tax in different ways to Fiscal Positions.

As shown in the example, you can see that there is a 0% tax for Intra-Community consumers within Europe. The system will record the amounts on certain accounts using certain tax grids. However, it will be shown as a 0% tax to the customer nonetheless. For this reason, the Label on Invoice will show 0% EU. This goes the same for the Tax Group name, which will also show as 0% above the Total line.

Tax Computation

Within Tax Computation, there are 4 main things you need to remember: Group of Taxes, Fixed Amount, Percentage of Price, and Percentage of Price Tax Included.

First, for Group of Taxes, you only have to think of it as adding as many taxes as you need. This is because the tax is a compilation of many sub taxes. That said, make sure that the sequence of the tax is correct. This is because the order of the taxes may influence their amounts computation, which is even more important for the taxes that impact the bases of their following ones.

The second element we need to look at in tax computation is Fixed Amount. Basically, it is about the fact that the tax will be in a fixed amount within the currency by default. This amount will stay the same and unaffected by the Sales Price. For instance, if a product has $1000 as its Sales Price and you add a $10 fixed tax, then you will get:

Product’s Sales Price	Price without tax	Tax	Total
1,000	1,000	10	1,010.00

Third, for Percentage of Price, it also functions as the taxable basis. The tax’s amount is calculated by taking the tax’s percentage and multiplying it by the Sales Price. For instance, if a product is $1000 in terms of Sales Price, then you add in a 10% Price tax and you will get:

Product’s Sales Price	Price without tax	Tax	Total
1,000	1,000	100	1,100.00

The fourth and final area of tax computation we need to discuss is Percentage of Price Tax Included. For this, you just have to remember that the taxable basis is the Total. For instance, when you have a product with $1000 as its Sales Price, and then you add in a 10% of Price Tax, with tax included. Then, you will get the following:

| Product’s Sales Price | Price without tax | Tax | Total | |———————–|——————-|——–|———-| | 1,000 | 1,000 | 111.11 | 1,111.11 |

Active

You need to keep in mind that just the taxes that are active may be put into other new documents. Besides modifying the Active field in Basic Options, you can also Activate Sales Taxes from the List view, which has been shown in the above sections.

One more thing to notice regarding this field is that you cannot delete the taxes that you have already put into use. That said, you still have the ability to deactivate the said taxes, so that they may not be used again in the future.

Tax Scope

The next field we need to discuss is the Tax Scope field. For this field, it will determine the application of your taxes. And by doing so, it will also set limits to where your tax is shown. There will be three main options that concern this operation, which is Sales, Purchase, and None.

• Sales: this will mainly concern Product’s Customer Taxes, Customer Invoices, etc.
• Purchase: this will primarily deal with Product’s Vendor Taxes, Vendor Bills, etc.
• None: you can use this on the taxes that you do not need to list beside other Purchase or Sales taxes but still wish to add in a Group of Taxes.

  Step 3. Set up Definition Tab

  Once you are finished with the Basic Options, then the next thing to do in order to set up your taxes in Odoo is to move on right to the Definition Tab. The Definition Tab will precisely apportion either the percentages of your computed tax to many accounts or the total number of the taxable basis and Tax Grids.

There will be three basic terms you need to know: Based On, Account, and Tax Grids.

• Based On: the Base will be the price that is shown on the invoice line. And as for the percentage of tax, it will indicate a percentage of your computed tax.
• Account: when you define it, a new Journal Item will be recorded.
• Tax Grids: you can use this to automatically create your Tax Reports, based on the regulations of your country.

  Step 4. Configure Advanced Options Tab

  When you are done with the three fields of the Definition Tab, then you are almost done with the process. We have now reached the final step in configuring your taxes in Odoo, which is configuring the Advanced Options Tab.

First of all, you should be able to see both Label on Invoices and Tax Group in this section. But we have already gone through them in the earlier steps, so we will not be discussing these fields again. Rather, we would move on to the other three fields, which are Include in Analytic Cost, Included in Price, and Affect Base of Subsequent Taxes.

Include in Analytic Cost

The first field we are going to take a look at is Include in Analytic Cost, which may be a bit difficult for some business owners, especially those who are just starting out. To put it simply, you only need to activate the Include in Analytic Cost option. Once it is activated, then the amount of the tax will be allocated to the exact Analytic Account, which will be the same as the invoice line.

Included in Price

The second field, which is just as important as the first one, is the Included in Price field. If you choose to activate the option, then the total amount, with the tax included, will be equal to the Sales Price. In other words, it will be the sum of the Tax and the Computed price with tax included.

For instance, if you have a product with $1000 as its Sales Price, and you put in a Price tax at a 10% rate, it will also be included in the total price. And you will get the result as shown in the table below:

Product’s Sales Price	Price without tax	Tax	Total
1,000	900.10	90.9	1,000.00

Another thing you need to notice is that the line subtotals, by default, will be excluded from tax on the invoices. So, if you want to show the line subtotals with tax included, you just need to head to Accounting and look for Configuration. Then, scroll down to Settings and select Customer Invoices. You should be able to see the Tax-Included option in the field of Line Subtotals Tax Display. After that, just select Save to record the process.

And as for the e-commerce area, the prices that are shown on the e-commerce website of your company will, by default, also be excluded from tax. To show the price with tax included, you will first need to head to your Website. After that, find Configuration and click on Settings. Next, select Pricing, and all you have to do is click on Tax Included option in the field of Product Prices. Then, select Save and you are done.

If you want to precisely define the prices, either include the tax or exclude the tax, then you can also look up how to Manage prices for B2B and B2C.

Affect Base of Subsequent Taxes

The thirst and last field we need to go over in this article is the Affect Base of Subsequent Taxes field. With the help of this option, the total amount, with tax included, will be turned into the taxable basis for any other taxes that are added to the very same product.

You also have the option to configure a completely new Group of Taxes in order to include the tax. Or another alternative is to directly add it to a product line.

Whichever order you choose to add the said taxes onto any product line does not really matter. This is because it will not affect how the amounts will be computed. When you directly add your taxes onto a product line, the only thing that matters is the tax sequence. This is due to the fact that the order in how the taxes are applied will be determined by the tax sequence.

If you need to change the order of the sequence of the taxes, the steps are relatively simple. You only need to head to Accounting, and scroll down to the Configuration section. Then, look for the Taxes field and modify the sequence according to your likings and needs. You just need to drag and drop the fields using the handles on the left of the tax names.

Final Thoughts

The tax engines of Odoo will aid you in many kinds of usage and computations. This amazing tool can enable you to apply the appropriate tax type for your company, record the amount of taxes collected, as well as create reports in a fraction of the time it takes to do so manually.

Having accurate data is one of the most critical parts of running a business. The Odoo software allows you to provide your accountant with all necessary information regarding your finances, sales, expenses, and other business accounting essentials by allowing you to manage these documents in real-time. In this tutorial, we have taken a look at How to configure taxes in Odoo in 4 steps. We hope you find this article useful and can successfully set up your own tax configuration process in Odoo.