Tax Declaration Netting Transactions
Tax declaration netting transactions are operational transactions that enable you to clear all balance sheet journal lines for tax details included in an approved tax declaration to a netting payable or receivable account.
Operational Transactions
When you create tax declaration netting transactions, Workday creates a transaction netting line for each unique combination of:
- Company.
- Ledger account.
- Alternate ledger account when configured.
- Transaction currency.
- Identical tax worktags when you select theEnable Tax Declaration Netting Transaction Grouping by Worktagstenant option.
The line amounts are the total tax posted to balance sheet accounts for that combination, in transaction currency and in company currency.
Accounting
Workday generates accounting for tax declaration netting transactions when you either:
- Submit the operational transaction when you don't configure an approval workflow.
- Approve the business process when you configure an approval workflow.
Workday posts:
- 1 journal line per transaction netting line to tax ledger accounts to clear declared amounts.
- 1 journal line to a receivable or payable control account to offset these amounts. The control account is determined by your account posting rules. See Tax Declaration Netting Account Posting Rules.
When you net tax declarations for VAT or GST groups, Workday also creates intercompany journal entries for all companies in the group.
Tax declaration netting transactions don't support alternate ledger currencies. When you configure an alternate ledger currency, Workday generates offsetting journal entries in the primary ledger currency only. You can manually create accounting journals for the alternate ledger currency.
Tax Worktags
Tax declaration netting transaction lines only include worktags from the original transactions included in tax declarations when you select the
Enable Tax Declaration Netting Transaction Grouping by Worktags
tenant option.They can include these worktags:
- Customer.
- Tax applicability.
- Tax code.
- Tax point date type.
- Tax rate.
- Tax recoverability.
Example
As you approve a tax declaration, you have these balances on your tax ledger accounts:
Ledger Account | Dr/(Cr) Balance |
|---|---|
VAT Receivable | 1,860 |
Taxes Payable | (9,800) |
Use Tax Payable | (400) |
Total
| (8,340)
|
When you approve tax declaration netting transactions, Workday posts journal entries that total:
Ledger Account | Debit | Credit |
|---|---|---|
VAT Receivable | 1,860 | |
Taxes Payable | 9,800 | |
Use Tax Payable | 400 | |
VAT Control | 8,340 | |
Total
| 10,200
| 10,200
|
This results in these tax ledger account balances:
Ledger Account | Dr/(Cr) Balance |
|---|---|
VAT Receivable | 0 |
Taxes Payable | 0 |
Use Tax Payable | 0 |
VAT Control | (8,340) |
Total
| (8,340)
|
Tax Declaration Amendments and Replacements
When you approve a replacement for a tax declaration that already has an approved netting transaction, you must cancel the existing netting transaction before you can complete a new one for the replacement. This ensures that Workday doesn't net the same taxable transaction twice.
You can complete netting transactions for tax declaration amendments that already have an approved netting transaction, as these only net incremental transactions.
In-Flight Transactions
After you enable tax reconciliation, when your tax declarations include prior-period activity:
- Monitor tax declaration netting transactions until all taxable transactions created before you enable tax reconciliation and dated before the initial period for tax reconciliation have been included in tax declarations.
- Create manual accounting journals as needed to clear amounts without corresponding tax reconciliation activities from tax ledger accounts.
Workday uses tax reconciliation activities to calculate the amounts to net. Workday doesn't generate these activities for taxable transactions that you create before enabling tax reconciliation and that are dated before the initial period, so the netting transaction doesn't reflect those amounts.
Example: In March 2026, you enable tax reconciliation with an initial period of January 2026. When you configure tax declarations to include prior-period activity, Workday might include a supplier invoice for December 2025 in subsequent tax declarations. Whether Workday nets the corresponding amount depends on the supplier invoice creation date:
Creation Date | Tax Reconciliation Activities | Amounts Included in Netting Transaction |
|---|---|---|
February 2026 | No (created before you enable tax reconciliation). | No |
March 2026 | Yes (created after you enable tax reconciliation). | Yes |
To reduce the need for manual adjustments, we recommend that you enable tax reconciliation as early as possible. You can use the
Tax Declaration to General Ledger Reconciliation
report before you create a netting transaction to see which amounts Workday will and won't net.