Example: Reverse VAT Calculation

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

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

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

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)

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)

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