Understand how Wafeq calculates tax amounts and the effect of rounding.
How Wafeq calculates subtotal, total tax amount and total invoice amount
Here's how Wafeq calculates these amounts:
- Total = Total of Line amount including tax for all lines
- Line amount including tax = Quantity * Price before tax * (1 - % discount) * (1 + % tax), rounded to 2 decimals.
- Total tax = Sum of Line tax amount for all lines
- Line tax amount = Quantity * Price before tax * (1 - % discount) * tax, rounded to to decimals
- Subtotal = Total - Total tax
A simple numerical example
Take the following invoice with only one line item. We assume the
Price is exclusive of tax. Note how the tax amount gets rounded from
|Line||Quantity||Price||Tax Rate||Tax||Line amount|
|Line item 1||1||45.30||15%||6.795 -> 6.80||45.30 + 6.80 = 52.10|
Let's calculate the VAT total as a percent of the Subtotal:
VAT Total / Subtotal = 6.80 / 45.30 = 15.01103%
As you can see, VAT is no longer exactly 15% of the subtotal because of the rounding.
Is this a problem?
No. Rounding effects are present in all financial applications. Different applications may handle rounding differently.