Let's be honest, nobody enjoys taxes—it's like a surprise party you didn't want. But with TimeChimp, at least you can navigate through the numbers with a smile, knowing that the system helps you calculate VAT without headaches. In this article, we'll explain how VAT on invoices is calculated and rounded.
Sometimes, the amount displayed in TimeChimp may differ from your own calculation. This is because TimeChimp has chosen to calculate and round VAT on an invoice per line.
This is in line with the tax authorities' rules because, according to them, you can choose whether to calculate VAT per invoice line or on the total amount. The rounding of the VAT amount is to two digits, as you learned in high school:
If the 3rd digit after the decimal point is less than 5, you round the amount down.
If the 3rd digit after the decimal point is 5 or higher, you round the amount up.
If there are only two digits after the decimal point, there is no rounding.
An Example
In words, this can be a bit abstract, so below you'll see how TimeChimp performs the calculation on the invoice:
First, TimeChimp calculates the amount per line:
Quantity * Price = total excluding VAT
Note: If the total amount excluding VAT has more than 2 digits after the decimal point, TimeChimp will display a rounded amount to 2 decimal places as the total.
The Total including VAT is calculated using the unrounded total amount.
Then, TimeChimp calculates the VAT per line:
Total excluding VAT * VAT percentage = total including VAT
The total amount including VAT is rounded to 2 decimal places per line according to the rules described above. This rounded amount is added up and displayed at the bottom of the invoice as the total amount.
The total amount excluding VAT at the bottom of the invoice is calculated using the rounded total amount excluding VAT.
Hopefully, this article has provided you with clarity and explanation about the VAT calculation in TimeChimp.
If you still have questions, you can always send a message to our support team via the chat in TimeChimp or by emailing support@timechimp.com.