Purchases carry tax, and the tax that applies depends on the situation, the vendor, where they are, the nature of the transaction. Fiscal positions handle that. This piece is about purchase taxes and fiscal positions in Odoo.
Tax on purchases
When a business buys, the purchase generally carries tax. The tax is part of what is recorded on the purchase and the vendor bill, and it has to be handled correctly, both because the amounts have to be right and because tax has to be accounted for and reported correctly. Odoo handles tax on purchases as part of the purchasing and accounting flow.
Why the right tax depends on the situation
The complication is that the tax that applies to a purchase is not always the same; it depends on the situation. The tax can depend on the vendor, where the vendor is, the nature of the vendor, the nature of the transaction. A purchase from a vendor in one situation may carry different tax from the same purchase from a vendor in another. So applying tax to purchases correctly is not just applying one fixed tax; it is applying the right tax for the situation. Doing that by hand, working out and applying the correct tax for every purchase, would be effort and a source of error.
What a fiscal position is
A fiscal position, in Odoo, is the mechanism that handles applying the right tax for the situation automatically. A fiscal position is, in essence, a rule that adapts the tax, and the accounts, to a particular situation. Different fiscal positions correspond to different situations, and a fiscal position can be associated with a vendor according to their situation. Then, when a purchase is made from that vendor, the fiscal position automatically applies the appropriate tax for that situation. The fiscal position is how Odoo applies the right tax without it being worked out and applied by hand each time.
How this helps
Fiscal positions help because they make purchase tax correct and automatic. With fiscal positions set up, the right tax for a purchase is applied automatically, based on the vendor's situation, rather than a person having to know and apply the correct tax. This is more accurate, the right tax is applied by the configured rule rather than relying on someone's knowledge, and it is less effort. For a business buying from vendors in different tax situations, fiscal positions are what keep purchase tax correct without it being a constant manual concern.
Setting up purchase taxes and fiscal positions
Setting up purchase taxes and fiscal positions means configuring the taxes the business deals with and the fiscal positions for the different situations its purchasing genuinely encounters, and associating the fiscal positions with vendors according to their situations. This should reflect the genuine tax situations the business's purchasing involves. Because tax is a matter of compliance and rules, and the rules are specific and can be intricate, setting up purchase taxes and fiscal positions is an area where it is sensible to ensure the setup is genuinely correct, with proper accounting knowledge, rather than approximated. Getting the tax setup right is part of keeping the business's tax accounting and reporting correct.
The takeaway
Purchase taxes in Odoo carry the tax on purchases, and fiscal positions handle the fact that the right tax depends on the situation, the vendor, where they are, the nature of the transaction. A fiscal position is a rule that adapts the tax to a situation, associated with vendors according to their situation, so the right tax is applied to a purchase automatically. This makes purchase tax correct and automatic rather than a manual concern. Set up the taxes and fiscal positions to reflect the genuine tax situations, with proper accounting knowledge, since tax is a matter of compliance. For how we approach Odoo, see our ERP practice.