1. Multicurrency Processing Implementation Guide
  2. Example: Foreign Invoice with Taxes

Example: Foreign Invoice with Taxes

For this example:

  • An invoice is entered in the euro (EUR) for a U.S. company.

  • The system uses the divisor conversion method to calculate amounts.

  • The EUR to USD exchange rate is 0.8900757.

  • The tax rate is five percent.

  • The tax type is for sales tax.

    Transaction

    Gross

    Taxable

    Tax

    Foreign

    1,527.75

    1,455.00

    72.75

    Domestic

    1,716.42

    1,634.69

    81.73

The system:

  • Calculates the gross amount.

    1,455.00 (taxable) + 72.75 (tax) = 1,527.75

  • Calculates the domestic taxable amount.

    1,455.00 ÷ 0.890075 = 1,634.6924 and rounds to 1,634.69

  • Calculates the domestic tax amount.

    72.75 ÷ 0.8900757 = 81.73462 and rounds to 81.73

  • Calculates the domestic gross amount.

    1,634.69 (taxable) + 81.73 (tax) = 1,716.42

    Note: If the system were to derive the domestic amount by dividing the gross foreign amount (1,527.75) by the exchange rate (0.8900757), the result would be 1,716.43 and not 1,716.42. And the domestic taxable and tax amounts (1,634.69 and 81.73, respectively) would not equal the gross domestic amount.