Reviewing VAT Calculations

To perform online tax calculations for bills that are not invoiced and not fully paid, click the Calculate Taxes button on the Bill Summary Info page. Both sales and use taxes and VAT are calculated for lines that have a valid VAT code or a sales and use tax code.

Note: VAT and sales/use tax amounts are not updated automatically when you change line amounts. To see updated tax amounts, you must retrigger the calculation from the Bill Summary Info page.

Credit lines retain the tax amounts that are calculated on the original invoices and therefore the tax amounts do not need to be recalculated.

Note: You must click the Save button to calculate and save any VAT and tax information that is associated with the bill. These amounts may change when the system calculates final VAT and taxes during bill finalization.

The system tracks VAT separate from sales and use tax; the VAT amount appears in the Total VAT Amount field. In Bill Summary, you can click the VAT amount value to access the Bill Summary - VAT Information page, where you can view details about VAT. The VAT Summary group box on the Bill Summary - VAT Information page displays the results of the VAT calculation.

When a bill line is subject to VAT reverse charge, a customer VAT amount is calculated for the line. The customer VAT amount is paid to the VAT authority directly by the customer, so it is not included in the invoice amount due from the customer.

When calculating VAT, the system performs the following functions:

  1. The system adds the net extended amounts of all bill lines that have the same VAT code to obtain a combined total net extended amount for that VAT code.

    Bill Lines

    Net Extended Amt.

    VAT Code

    1

    30 EUR

    A 10%

    2

    30 EUR

    A 10%

    3

    100 EUR

    B 5%

    4

    40 EUR

    A 10%

    5

    100 EUR

    B 5%

    In the preceding example:

    VAT Code A:30 EUR, 30 EUR, and 40 EUR = 100 EUR combined total net extended amount.
    VAT Code B: 100 EUR and 100 EUR = 200 EUR combined total net extended amount.

  2. If the invoice VAT calculation method is set to NET, the system subtracts any early payment discount percentages (Dscnt Pct) from the total net extended amount to obtain the VAT basis amount. If two percentage discounts exist, the system uses the larger of the two. The system uses no discount amounts, only discount percentages.

    For example:

    VAT Code A:100 EUR (total net extended amount) - 5 (early payment of 5% discount 
multiplied by the total net extended amount) = 95 EUR VAT basis amount
    VAT Code B: 200 EUR (total net extended amount) - 10 (early payment of 5% discount 
multiplied by the total net extended amount) = 190 EUR VAT basis amount

  3. If the invoice VAT calculation method is set to GROSS, the VAT basis amount equals the total net extended amount (regardless of an existing discount).

    For example:

    VAT Code A: VAT basis amount = 100 EUR (total net extended amount)
    VAT Code B: VAT basis amount = 200 EUR (total net extended amount)

  4. The system calculates the VAT amount by multiplying the VAT basis amount by the VAT code percent (VAT Pct).

    For example, with a VAT calculation method of NET: 

    VAT Code A:95 EUR (VAT basis amount) * .10 (VAT percent) = 9.50 EUR (VAT amount)
    VAT Code B: 190 EUR (VAT basis amount) * .05 (VAT percent) = 9.50 EUR (VAT amount)

    With a VAT calculation method of GROSS:

    VAT Code A: 100 EUR (VAT basis amount) * .10 (VAT percent) = 10 EUR (VAT amount)
    VAT Code B: 200 EUR (VAT basis amount) * .05 (VAT percent) = 10 EUR (VAT amount)

  5. The system proportionally distributes the VAT amount and VAT basis amount back into the individual bill lines by using the following calculation:

    Line VAT Amount = net extended amount for line / total net extended amount for VAT code * VAT amount.

    Line VAT basis amount = net extended amount for line / total net extended amount for VAT code * VAT basis amount

    Rounding differences are adjusted onto the line with the largest amount. The current rounding method (as specified in the bill header VAT values) may affect the VAT calculation.

    For example, for Bill Line 1 (Calc Method = NET):

    Line VAT amount:2.85 EUR = 30/100 * 9.50
    Line VAT basis amount: 28.50 EUR = 30/100 * 95 EUR

VAT Summary Information (VAT Calculation Method Net)

VAT Code

VAT Percent

VAT Discount Percent

Total Net Extended Amount

VAT Basis Amount

VAT Amount

A

10

5

100

95 EUR

9.50 EUR

B

5

5

200

190 EUR

9.50 EUR

VAT Summary Information (VAT Calculation Method Gross)

VAT Code

VAT Percent

VAT Discount Percent

Total Net Extended Amount

VAT Basis Amount

VAT Amount

A

10

5

100

100

10

B

5

5

200

200

10

When calculating customer VAT, the system performs the following functions:

  1. Invoice lines may be marked for VAT reverse charge, which means that the customer is responsible for remitting the VAT amount for the line directly to the VAT authority. Such lines will usually have a zero VAT percent, but a non-zero customer VAT percent.

    Bill Lines

    Net Extended Amt.

    VAT Reverse Charge

    VAT Code

    Customer VAT Code

    1

    30 EUR

    N

    A 10%

    2

    30 EUR

    N

    A 10%

    3

    100 EUR

    Y

    Z 0%

    A 10%

    4

    40 EUR

    N

    A 10%

    5

    50 EUR

    Y

    Z 0%

    A 10%

    In the preceding example:

    VAT Code A: 30 EUR, 30 EUR, and 40 EUR = 100 EUR combined total net extended amount.
    VAT Code Z: 100 EUR and 50 EUR = 150 EUR combined total net extended amount.
    Customer VAT Code A = 100 EUR and 50 EUR = 150 EUR combined total net extended
amount

  2. If the invoice VAT calculation method is NET, and the early payment discount is 5%, the VAT basis amounts are as follows:

    VAT Code A:100 EUR (total net extended amount) - 5 (early payment of 5% discount 
multiplied by the total net extended amount) = 95 EUR VAT basis amount
    VAT Code Z: 150 EUR (total net extended amount) - 7.50 (early payment of 5%
discount multiplied by the total net extended amount) = 142.50 EUR VAT 
basis amount
    Customer VAT Code A: 150 EUR (total net extended amount) - 7.50 (early payment of
5% discount multiplied by the total net extended amount) = 142.50 EUR VAT 
basis amount

  3. If the invoice VAT calculation method is set to GROSS, the VAT basis amounts are as follows:

    VAT Code A: VAT basis amount = 100 EUR (total net extended amount)
    VAT Code Z: VAT basis amount = 150 EUR (total net extended amount)
    Customer VAT Code A: VAT basis amount = 150 EUR (total net extended amount)

  4. The system calculates the VAT amount by multiplying the VAT basis amount by the VAT code percent (VAT Pct).

    For example, with a VAT calculation method of NET: 

    VAT Code A:95 EUR (VAT basis amount) * .10 (VAT percent) = 9.50 EUR (VAT amount)
    VAT Code Z: 142.50 EUR (VAT basis amount) * 0 (VAT percent) = 0 EUR (VAT amount)
    Customer VAT Code A: 142.50 EUR (VAT basis amount) * 10 (VAT percent) 
= 14.25 EUR (VAT amount)

    With a VAT calculation method of GROSS:

    VAT Code A: 100 EUR (VAT basis amount) * .10 (VAT percent) = 10 EUR (VAT amount)
    VAT Code Z: 150 EUR (VAT basis amount) * 0 (VAT percent) = 0 EUR (VAT amount)
    Customer VAT Code A: 150 EUR (VAT basis amount) * 10 (VAT percent) = 15 EUR 
(VAT amount)

  5. Then the VAT amounts and VAT basis amounts are proportionally distributed back to the individual invoice lines. Rounding differences are adjusted onto the line with the largest amount.

VAT Amounts (VAT Calculation Method Net)

Bill Lines

Net Extended Amt.

VAT Reverse Charge

VAT Code

VAT Basis Amount

VAT Amount

Customer VAT Code

Customer VAT Amount

1

30 EUR

N

A 10%

28.50 EUR

2.85 EUR

2

30 EUR

N

A 10%

28.50 EUR

2.85 EUR

3

100 EUR

Y

Z 0%

95 EUR

0 EUR

A 10%

9.50 EUR

4

40 EUR

N

A 10%

38 EUR

3.80 EUR

5

50 EUR

Y

Z 0%

47.50 EUR

0 EUR

A 10%

4.75 EUR

VAT Summary Information (VAT Calculation Method Net)

VAT Code

Total Net Extended Amount

VAT Basis Amount

VAT Amount

Customer VAT Code

Customer VAT Amount

A 10%

100 EUR

95 EUR

9.50 EUR

Z 0%

150 EUR

142.50 EUR

0 EUR

A 10%

14.25 EUR

VAT Amounts (VAT Calculation Method Gross)

Bill Lines

Net Extended Amt.

VAT Reverse Charge

VAT Code

VAT Basis Amount

VAT Amount

Customer VAT Code

Customer VAT Amount

1

30 EUR

N

A 10%

30 EUR

3 EUR

2

30 EUR

N

A 10%

30 EUR

3 EUR

3

100 EUR

Y

Z 0%

100 EUR

0 EUR

A 10%

10 EUR

4

40 EUR

N

A 10%

40 EUR

4 EUR

5

50 EUR

Y

Z 0%

50 EUR

0 EUR

A 10%

5 EUR

VAT Summary Information (VAT Calculation Method Gross)

VAT Code

Total Net Extended Amount

VAT Basis Amount

VAT Amount

Customer VAT Code

Customer VAT Amount

A 10%

100 EUR

100 EUR

10 EUR

Z 0%

150 EUR

150 EUR

0 EUR

A 10%

15 EUR