Understanding How Domestic Amounts Are Calculated on Foreign Invoices with Taxes

When you enter a foreign invoice with taxes, the system calculates the tax and discount amounts on the foreign side of the transaction. Using those tax and discount amounts, the system retrieves the exchange rate and calculates the tax and discount amounts for the domestic side of the transaction. If the invoice has multiple pay items, the system performs soft rounding after it calculates the amounts for each side of the transaction.

This diagram shows how the system calculates the foreign tax and gross amounts for a transaction that is entered in a foreign currency:

To calculate the tax and gross amounts, the system performs these calculations:

• Multiplies the foreign taxable amount by the tax rate to determine the foreign tax amount.

• Adds the foreign taxable and tax amounts to determine the foreign gross amount.

• Multiplies the foreign taxable and tax amounts by the exchange rate, which is determined by the currency code and exchange rate date, to determine the domestic taxable and tax amounts.

• Adds the domestic taxable and tax amounts to determine the domestic gross amount.

  Note: The system does not multiply the foreign gross amount by the exchange rate to determine the domestic gross amount.