The Agile ERP includes an integrated Tax Calculator that complies both with EU and US regulations.
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Consider this example of an order:
What | Net Price | 19% Tax | Gross Price |
|---|---|---|---|
Line 1 | 3,40 € | ? | ? |
Line 2 | 2,40 € | ? | ? |
Total | ? | ? | ? |
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 (used by 3YOURMIND)
Calculate the tax for each item individually.
For the total prices, we create the sum for each column individually.
What | Net Price | 19% Tax | Gross Price |
|---|---|---|---|
Line 1 | 3,40 € | 3,40 € * 0,19 ≈ 0,65 € | 3,40 € + 0,65 € = 4,05 € |
Line 2 | 2,40 € | 2,40 € * 0,19 ≈ 0,46 € | 2,40 € + 0,46 € = 2,86 € |
Total | 3,40 € + 2,40 € = 5,80 € | 0,65 € + 0,46 € = 1,11 € | 4,05 € + 2,86 € = 6,91 € |
Benefit:
Each item contains prices with 2 decimal places for net and gross.
For each column the total is the sum of all line prices
Drawback:
The tax on the total seems to be off: (5,00 80 €* 0,19 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
Calculate the tax for each item individually.
Create the sum for the Gross price only
Use the VAT rate to derive a Total net Price.
What | Net Price | 19% Tax | Gross Price |
|---|---|---|---|
Line 1 | 3,40 € | 3,40 € * 0,19 ≈ 0,65 € | 3,40 € + 0,65 € = 4,05 € |
Line 2 | 2,40 € | 2,40 € * 0,19 ≈ 0,46 € | 2,40 € + 0,46 € = 2,86 € |
Total | 6,91 € - 1,10 € = 5,81 € | 6,91 € *0,19 / 1,19 ≈ 1,10 € | 4,05 € + 2,86 € = 6,91 € |
Benefit:
The tax calculation is correct in the last line.
Drawback:
For the Net prices and tax column, the sum of the line prices are not equal to the total price (when using only 2 decimal digits). (e.g. 3,40 € + 2,40 € = 5,80 € ≠ 5,81 €)
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