How is VAT calculated after applying a discount

[Johan_H]

Hi,

I need to know how B1 calculates VAT on the header level, after you apply a discount on the header level, when an invoice has multiple rows with different VAT percentages per row:

So for example:

Lines:

Line	Total no VAT	VAT %	VAT
1	10,00	23 %	2,30
2	10,00	23 %	2,30
3	10,00	9 %	0,90

Totals:

	Document totals
Total no VAT	30,00
VAT	5,50
TOTAL	35,50

Now when I apply a discount of 5,00 on the header level, the tax amount becomes 4,58

	Document totals
Total no VAT	30,00
Discount	5,00
VAT	4,58
TOTAL	29,58

How does B1 calculate this new tax sum ?

Regards,

Johan

[K_Pauquet · Accepted solution]

Hi Johan,

the 5.00 you discount on header level is split equally between the rows, that gives you 10-1.666667 = 8.333333 as net amount in each row.

Next, the VAT percentage is applied to that, which gives you a VAT amount of twice1.916667 for the 23% & 0.75 for the 9%. These add up to 4.583333 which is then rounded to 4.58.

All the best,

Kerstin

[Johan_H · Accepted solution]

Hi Kerstin,

Thanks for that. Just for clarification, item quantities are not taken into consideration in any way ? So as you said, the discount is only divided by the amount of rows ?

In other words, if I adapt the example, B1 would calculate like so ?:

Line	Total no VAT	Discount	New Total no VAT	VAT %	VAT
1	14,50	1,666667	12,83	23	2,95
2	14,50	1,666667	12,83	23	2,95
3	1,00	1,666667	-0,666667	9	-0,06

Total VAT 5,84

Regards,

Johan

[Former Member · Accepted solution]

Hi Johan.......

When you define Tax Formula, There you find Discount field where formula is based.

You can include this discount to work it out.

Your problem will be solved........

Regards,

Rahul

[K_Pauquet · Accepted solution]

Hi Johan,

you used the same net amount in all rows for your previous example, so the discount was distributed equally.

Looking at your scenario now:
row1 = 14.5 with 23%
row2 = 14.5 with 23%
row3 = 1 with 9%
Total net = 30

5.00 discount applied at header level is distributed according to the percentage of the total

14.5 is 48.33333% of 30

1 is 3.33334 % of 30

Therefore the discount amount is:
rows 1 & 2 -> 48.333333% of 5 = 2.416667 each
row 3 -> 3.33334% of 5 = 0.166667

The net after discount is:

rows 1 & 2 net after discount = 14.5 - 2.416667 = 12.083334 each
row 3 net after discount = 1 - 0.166667 = 0.833333

VAT on the net after discount is:

row 1 & 2 Vat at 23% on 12.083334 = 2.779168 each rounded to 2.78
row 3 Vat at 9% on 0.833333 = 0.075 rounded to 0.08

Hence the total VAT amount is 5.64

All the best,

Kerstin

[Johan_H · Accepted solution]

Hi Kerstin,

Thanks for the clarification.

In the mean while I had come to the same outcome, via a different route:

5 / 30 = 16,666667 (%)

line 1 & 2: 14,50 * 0,16666667 = 2,416 (rounds to 2,42)

line 3: 1,00 * 0,1666667 = 0,1666667 (rounds to 0,17)

Math is indeed a beautiful thing.

Regards,

Johan

[former_member186095]

Hi Johan,

I agree with Kerstin's anwer.

The discount in the header will be distributed to row of document and then the vat amount is changed.

You can also check the tax amount column in the row to see the change of tax amount if there is a discount.

Jimmy

[former_member184718]

Hi Johan,

The system is designed to work with when you give document discount, the amount is proportionately distributed to the line items.

For your data, 1000 - 166.66 = 833.33 x 23% = 191.66

                      1000 - 166.66 = 833.33 x 23% = 191.66

                      1000 - 166.66 = 833.33 x 9% =    74.99

                                                               ----------------

                                                      Total    =   458.32

                                                                ----------------

I hope this helps you.

Thanks.

Hari