Accrual-cash taxation

What is meant by Accrual-cash taxation?

Accrual-cash taxation is a method of VAT accounting where taxation is based either on the accrual principle (at the time of invoicing) or the cash principle (at the time of payment receipt). Under the accrual principle, tax becomes due as soon as an invoice is issued, regardless of whether the payment has been received. Under the cash principle, tax is due only when the payment is actually received. This method provides flexibility for companies, especially smaller ones, to better manage their liquidity.

Typical features of software in the area of accrual-cash taxation include:

1. Automatic Revenue Recording: Recording of revenues based on the accrual or cash principle, depending on the chosen method.
2. VAT Calculation: Automatic calculation of the VAT due based on the time of invoicing or payment receipt.
3. Reporting: Creation of reports and summaries for accrual and cash taxation for improved transparency and traceability.
4. Liquidity Management: Support for planning and monitoring liquidity by considering payment receipts and outstanding invoices.
5. Integration with Accounting Systems: Seamless integration with existing accounting and ERP systems to synchronize revenue data.
6. Tax Compliance: Ensuring adherence to legal requirements and regulations concerning VAT.
7. Notification System: Automatic notifications about due payments and upcoming tax obligations.