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The Agile ERP will automatically check if VAT is applicable based on each order. |
Is the
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VAT rate correct? There seems to be a rounding issue.
Consider this example of an order:
What | Net Price | 19% Tax | Gross Price |
|---|---|---|---|
Line 1 | 1 | ? | ? |
Line 2 | 3,00 EUR | ? | ? |
Total | 5,00 EUR | ? | ? |
To calculate the VAT, there are two legally valid methods of calculating the tax. The vertical and the horizontal method.
Vertical Method to calculating the tax
To calculate the tax, we calculate the tax for each item individually and then add all taxes together:
What | Net Price | 19% Tax | Gross Price |
|---|---|---|---|
Line 1 | 3,40 € | 3,40 € * 0,19 ≈ 0,65 € | 4,05 € |
Line 2 | 2,40 € | 2,40 € * 0,19 ≈ 0,46 € | 2,86 € |
Total | 5,80 € | 1,11 € | 6,11 € |
Benefit:
Each item contains prices with 2 decimal places for net and gross.
Drawback:
The tax on the total seems to be off: (5,00 € * 0,19 = 1,10 € ≠ 1,11 €). This effect increases for high quantities and lower prices. Note, that although the tax seems to be not correct on the total, this method of calculating tax is legal and commonly used.
Horizontal Method to calculating the tax
What | Net Price | 19% Tax | Gross Price |
|---|---|---|---|
Line 1 | 3,40 € | ?? | ?? |
Line 2 | 2,40 € | ?? | ?? |
Total | 5,80 € | 5,80 € * 0,19 ≈ 1,10 € | 6,10 € |
Benefit:
The tax calculation is correct in the last line.
Drawback:
The prices per line are either not defined or not calculable with 2 decimal digits.
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Due to the fact that 3YOURMIND supports showing line prices both in NET and in GROSS for different users, 3YOURMIND uses the vertical method for calculating tax. |
Processing Orders from the EU to non-EU countries
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