VAT setup, calculation and rounding rules

This page explains how vat calculation is done (or can be done depending of options you choose) into Dolibarr ERP CRM.

Standard VAT and rounding rules

Let's start with the example we will use. Imagine an invoice that contains the following lines (We also live into a country where total must be rounded with 2 decimal numbers).

	A Description	B Quantity	C Unit price	D Vat rate	E Total without tax =(B*C)	F Exact tax amount =(D*E)	G Tax amount rounded on 2 dec =round(F)	H Exact price inc tax =(E+F)	I Price inc tax rounded on 2 decimals =(E+G)
1	Product alpha	1	1.24	10%	1.24	0.124	0.12	1.24+0.124=1.364	1.36
2	Product beta	1	1.24	10%	1.24	0.124	0.12	1.24+0.124=1.364	1.36

We have 2 ways to calculate the total of invoice: making a sum of rounding lines or rounding the sum of lines.

1) If we choose to make the sum of lines after rounding (on 2 decimals) lines, we get:

• Total without tax: 1.24(E1) + 1.24(E2) = 2.48
• Total tax 10%: 0.12(G1) + 0.12(G2) = 0.24 (we sum the rounded values of tax on each line)
• Total inc tax (we sum total without tax + total tax): 2.48(Ex) + 0.24(Gx) = 2.72

Note that if we sum rounded price inc tax on each line, we get: 1.36(I1) + 1.36(I2) = 2.72 (same result so we know there is no error)

2) If we choose to round (on 2 decimals) amount after summing all lines, we get:

• Total without tax: 1.24(E1) + 1.24(E2) = 2.48 (same than in method 1)
• Total tax 10%: (1.24(E1) + 1.24(E2)) * 10% = 0.124 + 0.124 = 0.248 rounded to nearest to have a total on 2 decimals give 0.25 (we sum amount without tax for each lines, calculate vat rate on this and after we round value on 2 decimals)
• Total inc tax (we sum total without tax + total tax): 2.48 + 0.25 = 2.73

First thing we can note is that result from method 1 differs of result from method 2. Difference is only 0.01 but if you have n times the same line, difference can be higher but always lower or equal to (n-1)*0.01. Also if you decide to round up or down instead of "to the nearest", you will have same problem (for example with a rounding down, try with a quantity of 2 on line 2 and you will have same differences between method 1 and 2). Difference will just appears with different data but will still occurs, so problem is not on how we make rounding but when.

Second thing we can note is that if we use method 2, we must not show the column I onto invoice, otherwise to total you show on your invoice (2.73) will not be same that total you get summing total of each line (1.36+1.36=2.72). Showing column H might be better but total will still differs because total (2.73) is rounded and result of summing column H lines (1.364+1.364=2.728) will still differs.

So what to do ?

• In some countries, calculation must always be done using method 1 for generating invoice. As this is the default calculation rule for Dolibarr, there is nothing to do.
• In other countries (very rare), calculation must always be done using method 2 for generating invoice. To avoid having total shown at the top of the invoice that differs from total of detailed line, just do not show column I on invoice. This is the case with Dolibarr default invoice templates, so that's not a problem. To enable this rule of calculation, you must use Dolibarr version 3.5+ and set constant MAIN_ROUNDOFTOTAL_NOT_TOTALOFROUND to 1 (Home - Setup - Other).
• In most countries, the 2 methods are possible. So here, just use method 1 that will be more efficient when you will make accountancy (because, if you use method 2, total of vat on your invoice will not be sum of F, nor sum of G and this may create confusion later). If you prefer to use method 2, use Dolibarr version 3.5+ and set constant MAIN_ROUNDOFTOTAL_NOT_TOTALOFROUND to 1 (Home - Setup - Other).

Second or Third Tax

For Brazil

See page BrasilTaxes

For Canada

Lexical:

• GST = Goods and Services Tax (TPS = Taxe sur les Produit et Services for Quebec)
• PST = Provincial sales taxes (TVQ = Taxe de Vente Québecoise for Quebec = QST = Quebec Sale Tax)

Setup

The GST is applied automatically on each lines (when added or edited). Value of rate for second tax PST is automatically extracted by system from the dictionary table of VAt rates, for the GST vat rate line used and your country (Table llx_c_tva).

Exemple of user setup: Go into Home - Setup - Dictionary - VAT and sale tax, into column "Rate" enter a GST vat rate with value 5, into column "Tax 2" (PST) enter a VAT rate 9.5 with type "2" (Type "2" means the tax 2 is calculated for product and services on the price including the GST). Another solution is to set the "Tax 2" (PST) with vat rate 9.975 and set type of tax 2 to "1" (Type "1" means tax 2 is added for product and services, and calculated on net price, so does not include GST vat for calculation. It is same than using 9.5 and making calculation on price including GST). Change values 5, or 9.5 or 9.975 according to your province rates.

Example of calculation

	A Description	B Quantity	C Unit price	D1 Vat rate GST	D2 Vat rate PST	E Total without tax =(B*C)	F Tax GST =(B*C*D1)=(D1*E)	G Tax PST (B*C*D2)=(D2*E)	H Price inc GST + PST=(E+F+G)
1	Product alpha	10	10	5%	9.975%	100	5	9.98	114.98

For India

There is a second vat. It seems to work like vat RE for spain (See in a Spain chapter)

For Italy

You may need to add a negative withholding tax calculated on net amount.

Setup

Value of rates are found into the dictionary table from the standard vat rate (Table llx_c_tva). Total with tax and total amount of vat is modified according to calculation.

Setup example: When vat rate is 22, add a tax 2 (witholding) of type "1" (Type "1" means tax 2 is added for product and services and calculated on net price), rate is -20% (negative means amount will be substracted)

Example or calculation

	A Description	B Quantity	C Unit price	D1 Vat rate	D2 Vat rate withholding tax	E Total without tax =(B*C)	F Tax VAT =(B*C*D1)	G Tax 2 (B*C*D2)	H Price inc VAT + Tax 2=(E+F+G)
1	Product alpha	10	10	22%	-20%	100	22	-20	102

For Spain

Specific management for spain are supported from Dolibarr 3.0.

In spain, there is 2 more vat rate for each line:

• The vat rate RE (a vat rate calculated on total without tax for products, and added to total to obtain total with tax)
• The vat rate IRPF (a vate rate calculated on total without tax for services, and substracted from total to obtain total with tax)

Both complementary taxes can't be found in an invoice. RE is applied only for products and IRPF only for services. Because IRPF tax is always negative, in credit invoices the total IRPF will be positive.

Setup

The two vat rate are applied automatically (if company has been setup to use them) on each lines (when added or edited). Value of rates are found into the dictionary table from the standard vat rate (Table llx_c_tva). Total with tax and total amount of vat is modified according to calculation.

Setup example: For standard vat rate 10, Localtax 1 (RE) is set with type "3" (tax is applied on net price, for products only), rate 1.4%

Example of calculation

	A Description	B Quantity	C Unit price	D1 Vat rate	D2 RE	E Total without tax =(B*C)	F Exact tax amount =(B*C*D1)=(D1*E)	G Tax RE (B*C*D2)=(D2*E)	H Price inc standard vat + RE=(E+F+G)
1	Product alpha	10	10	10%	1.4%	100	10	1.4	111.4

Example of calculation in credit notes

	A Description	B Quantity	C Unit price	D1 Vat rate	D2 IRPF	E Total without tax =(B*C)	F Exact tax amount =(B*C*D1)=(D1*E)	G Tax RE (B*C*D2)=(D2*E)	H Price inc standard vat + RE=(E+F+G)
1	Product alpha	10	-10	21%	-21%	-100	0	21	100

Note

R.E. (Localtax1) is applied to product sales and not to service sales. But a service may be invoiced in the same invoice with a product sale if this is related to the product sales and it increasing its cost (ex: shipping costs).

Currently to treat this case you must enter these services (ex: shipping costs) with a free line, and indicating the type as product, not as service.