Tax calculations differ

Hi,

based on the newsletter I just checked out demo.invoiceninja.com to see if it’s something I could use in the future.

One of the main problems with v4 is the calculation differences of the tax values. You remember, the discrepancy between calculating tax on every item compared to calculating tax on the net sum.

I checked this out and found this:

So, on first sight, it seems that there’s still some rounding difference. Could you clarify that, please?
I know, it’s only 1 cent difference, but it could be more depending on the amount of items on the invoice, and - more importantly - the german finance authority doesn’t give a sh*t about that, they will beef around if there’s a discrepancy, even if it’s only one cent per invoice

Thanks, we’ll look into it…

Hi,

I’ve looked into this issue, I believe the calculations are correct.

The difference is from the rounding amounts added when summing each line item versus applying the tax to the total amount.

It’s worth noting a key place to check for accuracy in the app is to compare the amount of an invoice when viewing it versus editing it. When you view an invoice you’re seeing the amount calculated by the server, when you edit it you’re seeing the amount calculated by the local app.

I know that it’s a rounding issue (that’s exactly what I wrote in the first sentence of my bug report). And that’s the problem here. This must not happen, otherwise you get in really bad trouble with your tax authority on an audit. You need to sum up the amounts without any rounding beforehand, and apply the rounding to 2 decimal places at the very end.
In any case, it must be made sure that the sum in both cases stays the same, to the cent.

(Besides that: I don’t use any app, only the web frontend)

Can you link to somewhere which documents this?

I’m sorry, I don’t know what you mean. What documents?

If you mean the rounding problem, that’s easily explained. If you have - fictional example - 500000€ net sales and thus owe 80000 tax, but because of the rounding difference your books say that you owe 75000€ tax and have paid only 75000€ because of that, your tax authority will ask you for the missing 5000€. It’s simple as that. you don’t argue with the tax authority.

It looks like this app offers either line-level or document-level rounding, it could be something we’d add. Note: they set line-level as the default.

https://help.avalara.com/Frequently_Asked_Questions/Tax_Calculation_FAQ/What_is_the_difference_between_Document_and_Line_level_rounding%3F

Ah…

Line-Level Rounding :

  • Round the tax amount to two decimal places for each tax line
  • Discard the rounding difference

Yep, that’s exactly what I meant. So, you’re right, “Document-Level Rounding” should do the trick.

Feel free to create an issue to track the request, seems like a good change