Get Credit for the Tax You Pay

If your business is registered for sales tax, VAT, or GST, tracking tax on your expenses and payables is essential for accurate reporting. Recording taxes correctly ensures you can substantiate claims during audits and maintain compliance with tax regulations.

Why Track Tax on Expenses?

When your company is registered for tax, the taxes you pay on business purchases (often called input tax) can typically be used to offset the taxes you collect from sales (output tax). This reduces the net amount you owe to tax authorities.

For example, if you collected $1,000 in tax from customer invoices but paid $300 in tax on business expenses, you may only owe $700 to the tax authority (depending on your local regulations).

Tracking tax on expenses and payables in Officaid helps you:

• Maintain accurate records – Keep detailed documentation for tax filing and audits
• Calculate input tax automatically – Officaid computes the tax component based on the rate you select
• Support compliance – Have clear records of tax paid on each transaction
• Prepare for filing – Export tax data when preparing your periodic tax returns

Before You Begin

To add tax to expenses and payables, you'll need:

• At least one tax rate configured in your Officaid account
• Your business tax registration details set up in Company settings (for tax invoices)

Tax rates are managed in Admin → Company under the Tax Registry section. If you don't see any tax rates in the dropdown when recording expenses, you'll need to add them there first.

Adding Tax to an Expense

When recording an expense where tax was charged:

1. 1 Navigate to Finance → Expenses and click Add New Expense.
2. 2 Fill in the vendor, amount, and other details as usual.
3. 3 Toggle the Taxable switch to enable tax fields.
4. 4 Select the appropriate tax rate from the Tax dropdown.
5. 5 Review the Tax Amount that Officaid calculates automatically.
6. 6 Click Add Expense to save.

The same process applies when editing an existing expense. Open the expense, enable the Taxable switch, select a rate, and save your changes.

Adding Tax to a Payable

The process for payables is identical to expenses:

1. 1 Navigate to Finance → Expenses and open the Payables tab.
2. 2 Click Add New Payable and fill in the details.
3. 3 Toggle the Taxable switch to enable tax fields.
4. 4 Select the appropriate tax rate from the Tax dropdown.
5. 5 Review the Tax Amount calculated by Officaid.
6. 6 Click Add Payable to save.

When you later record a payment against this payable, the tax information carries over to the resulting expense record.

How Tax Is Calculated

Officaid uses the tax-inclusive method for expenses and payables. This means the amount you enter is treated as the final amount you paid, which already includes tax.

This approach makes sense because when you pay for something, you pay the total amount inclusive of tax. Unlike invoices where you might add tax on top of a base price, expenses reflect what actually left your account.

How Officaid extracts the tax amount:

When you enter a total amount and select a tax rate, Officaid calculates backwards to determine how much of that total was tax.

Example with 9% tax rate:

If you record an expense of $109.00 with a 9% tax rate:

• Tax Amount = $109.00 × (9 ÷ 109) = $9.00
• Amount before tax = $109.00 − $9.00 = $100.00

Example with a different amount:

If you record an expense of $120.00 with a 9% tax rate:

• Tax Amount = $120.00 × (9 ÷ 109) = $9.91
• Amount before tax = $120.00 − $9.91 = $110.09

Officaid performs this calculation automatically when you select a tax rate, so you don't need to do the math yourself.

Choosing the Right Tax Rate

Different purchases may have different tax treatments. When selecting a tax rate, consider:

• Standard rate – Most business purchases fall under the standard tax rate for your region.
• Reduced rates – Some goods or services may qualify for reduced tax rates.
• Zero-rated – Certain items may have 0% tax but still need to be tracked for reporting.
• Exempt – Some purchases may be tax-exempt and shouldn't have tax recorded.
• Not applicable – If the vendor isn't tax-registered, no tax would have been charged.

If you're unsure which rate applies to a specific purchase, check the vendor's invoice or receipt. Tax-registered vendors are typically required to show the tax amount on their invoices.

When Not to Add Tax

Don't add tax to expenses in these situations:

• Vendor isn't tax-registered – Small vendors below the registration threshold may not charge tax.
• Purchase is tax-exempt – Certain categories of goods or services may be exempt from tax.
• You can't claim the input tax – Some expenses (like entertainment in certain jurisdictions) may not be eligible for input tax claims even if tax was paid.
• Your business isn't tax-registered – If you're not registered, you generally can't claim input tax credits.

In these cases, simply leave the Taxable switch off and record the full amount as the expense.

Viewing Tax Information

Once you've recorded expenses and payables with tax, you can see the tax information in several places:

• Expense/Payable details – Open any transaction to see the tax rate and amount applied.
• Excel exports – Download expense data to see tax amounts in spreadsheet format.
• Financial reports – Tax information flows into your financial reports for accurate profit calculations.

Frequently Asked Questions

What's Next?

Now that you understand how to track tax on expenses, explore these related guides:

• How to Record an Expense – Add expenses with tax tracking
• Creating a Payable – Track bills with tax amounts
• Downloading and Exporting Expense Data – Export expense data including tax information