Cash Flow
You know what the four tax rows mean and why VAT is a cash problem even when it costs nothing.
VAT is the classic cash-flow trap: over a production it costs a reclaiming company nothing, and in any given month it can be the largest single movement on the account.
The plan carries four rows for it.
| Row | What it is | Direction | | ------------------ | ---------------------------------- | ----------- | | **Invoiced taxes** | invoiced sales tax | you hold | | **Paid taxes** | sales tax paid to third parties | you advance | | **Declared taxes** | declared taxes paid to authorities | out | | **Refunded taxes** | refunded tax from authorities | in |
**Invoiced** and **Paid** are what happens as you trade: tax charged on what you invoice, tax paid on what you buy. Neither is yours — one is money you are holding, the other money you have advanced.
**Declared** and **Refunded** are the settlement with the authority, and they are the ones that actually move cash. They appear in the period the declaration falls due, **not** in the periods the underlying costs did.
The two sides net off once per interval and the balance moves in one direction: you pay the difference, or you are refunded it.
That is the whole reason VAT distorts a cash flow. A production spending heavily before it invoices carries the input VAT on everything it buys — often for months — and gets it back in a lump. The cost is nil and the cash requirement is very real.
Tax reaches this plan because it is applied on budget accounts and financing sources. An account with no tax applied contributes nothing to **Paid taxes** — so the production advances that VAT in reality and the plan never shows it.
The totals stay right and the cash goes wrong, which is the worst combination: nothing looks broken. See the budgeting manual's [apply a tax to an account](/kb/article/apply-a-tax-to-an-account).
Watch the gap between **Paid taxes** and **Refunded taxes**, and how long it lasts. That gap is money the production has lent the state, and it has to be funded like any other gap — often by exactly the credit line that also covers the shoot — see [add a credit line](/kb/article/add-a-credit-line).
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