Setup Considerations: Tax Declaration Netting
You can use this topic to help make decisions when planning your configuration and use of tax declaration netting. It explains:
- Why to set it up.
- How it fits into the rest of Workday.
- Downstream impacts and cross-product interactions.
- Security requirements and business process configurations.
- Questions and limitations to consider before implementation.
Refer to detailed task instructions for full configuration details.
What It Is
Tax declaration netting enables you to quickly clear balance sheet journal lines for VAT and other transaction taxes into a netting payable or receivable account.
Business Benefits
- Helps ensure that tax payable and receivable balances reflect only outstanding tax liability, improving visibility.
- Reduces the need to manually create accounting journals to clear declared tax amounts into a control account.
- Improves auditability by establishing a link between tax declarations and their netting entries.
Use Cases
You can:
- Initiate transaction tax declaration netting manually or automatically when you approve tax declarations.
- Configure approval workflows for tax declaration netting.
- Automatically create journal entries to move the resulting due and owed tax amounts to receivable and payable control tax accounts for the primary company that files the tax declaration.
- Automatically create intercompany journal entries that reflect the tax amounts owed to and due from each individual company in a VAT or GST group.
Questions to Consider
Questions | Considerations |
|---|---|
What level of detail do you need for netting journal lines? | By default, Workday posts 1 netting journal line for each combination of:
Workday omits worktags on these journal lines. To preserve the tax worktags from the original transaction lines, you can select the Enable Tax Declaration Netting Transaction Grouping by Worktags tenant option. This results in more granular journal lines additionally grouped by combinations of these tax worktags:
If you've enabled optional worktag balancing, you must leave the Enable Tax Declaration Netting Transaction Grouping by Worktags tenant option unselected to use tax declaration netting. In other cases, we recommend that you enable grouping by worktags, as worktags enable true reversal entries that zero out entries in tax ledger accounts when rolling forward ledger accounts at year end. |
How much oversight on tax declaration netting do you want? | You can configure business processes to net approved tax declarations with minimal manual intervention.
If you want more oversight, you can:
|
Recommendations
To reduce the need for manual adjustments, we recommend that you set up tax reconciliation as early as possible, as Workday only nets transactions that you create after setting up tax reconciliation. See Tax Declaration Netting Transactions.
Requirements
- Set up tax reconciliation before using the feature, as Workday uses tax reconciliation activities to calculate total tax amounts by ledger account.
- Configure a primary company for each VAT group used in tax declarations that you want to net.
Limitations
Tax declaration netting doesn't support:
- Alternate ledger currencies.
- Required worktag balancing.
You can use tax declaration netting when you've enabled optional worktag balancing, but you must leave the
Enable Tax Declaration Netting Transaction Grouping by Worktags
tenant option unselected.Tenant Setup
You can access the
Edit Tenant Setup - Financials
task to configure the:
- Generation of IDs for tax declaration netting transactions.
- Grouping of netting journal entries.
Security
Domains | Considerations |
|---|---|
Process: Tax Declaration Netting in the Financial Accounting functional area | Access tax declaration netting tasks and reports. |
Reports: Transaction Tax in these functional areas:
|
|
Security Configuration domain in the System functional area | Configure business process security policies. |
Set Up: Company General domain in the Common Financial Management functional area | Override the default ID generator for tax declaration netting transactions for companies. |
Set Up: Period Close domain in the Common Financial Management functional area | Configure the Tax Declaration Netting Transaction period close activity group. |
Set Up: Tenant Setup - Financials domain in the System functional area | Configure tenant options. |
These domains in the System functional area:
| Configure business processes. |
Business Processes
Business Processes | Considerations |
|---|---|
Tax Declaration Event
| You can configure the Initiate Tax Declaration Netting Transaction Creation service step to automatically create and submit a netting transaction after you approve a tax declaration. |
Tax Declaration Netting Event
| You can edit the default business process definition to configure approval workflows for tax declaration netting transactions. |
Reporting
Reports | Considerations |
|---|---|
Find Tax Declarations
| Enables you to:
|
Find Tax Declaration Netting Transactions
| Enables you to access tax declaration netting transactions. |
You can also use these report data sources to create custom reports:
- Tax Declaration Netting Transactions
- Tax Declaration Netting Transaction Lines
Integrations
No impact.
Connections and Touchpoints
Workday offers a Touchpoints Kit with resources to help you understand configuration relationships in your tenant. Learn more about the Workday Touchpoints Kit on Workday Community.