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VAT calculation formula.

I was playing recently with VAT tax calculations, and am missing something. Say, if we have VAT tax in our country 21%. Registered new VAT tax with 0.21 value. After this I register new product, say for price 18.00EUR and assign registered VAT 21% to the price.

The result given by Drupal Commerce is 21.53EUR, which is not what expected. 21% of 18.00EUR is 3.78EUR, and expected total amount (e.g. VAT included) would be 21.78EUR. Or the other way, if I define price for an item, than price should include 21% VAT. The last is ok, as due to tests, input amount is NET, and taxes are applied on top.

What am I missing? I was trying to figure out tax application formula, but could not find place in UI. Is this done within code?

P.S. I've chosen "Round the half up" for VAT tax type, thus expecting, that if the figure would be 3.775, it would give the result of 3.78. Is this correct?

Asked by: j2b
on September 23, 2012

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P.S. Playing with Commerce Kickstart 7.x-2.0-dev version

- j2b on September 23, 2012

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I guess, I've found an answer for my own question. Although, the actual situation is different from provided video on basic Tax calculation. There is another issue, which was very strange.

1) After default installation, French VAT 19.6% is added with demo store. And adding additional VAT type tax, just didn't go through. All VAT calculations were calculated according to French Tax rate, despite particular selection in product variation. So from this it seems, that there could be no more than one VAT tax rate. Although...

2) I deleted default French tax rate, and added own - say 21%, or 0.21. And after modification of product variation, and indication of new tax 21% (VAT type), product price remained the same!! But in Checkout table - 21% was deducted from indicated price. This is in opposite from video explanation. I expected, that VAT tax will be added to product variation price, but it isn't. I still do not know, why French VAT tax was calculated in addition, but new tax - not.

In short, if you delete default French tax, and create your own, indicated price in product variation will be VAT inclusive. So - you can not put 10EUR price, and expect it to be shown to public 12.10EUR (with added VAT). You have to put 12.10EUR, indicate VAT, and it will recalculate Net price for 10EUR.

Can anybody comment on this with own experience?

Answer by: j2b
Posted: Sep 23, 2012

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In addition, if I do not define VAT from selection, still price displayed is updated, adding around 44% to price input in field.

- j2b on September 23, 2013

What happen, if you don't delete the French tax rate, just modify that from 0.196 to 0.21 ? Anyway I found that the checkout progress has serious deficiencies (deficiencies of calculating VAT, calculating discounts, calculating shipping quotes, calculating the final price etc.) and I wrote suggestions, how to be modificated the checkout progress: http://www.drupalcommerce.org/discussions/4253/checkout-progress-inappro...
What is your opinion about that?

Answer by: memil
Posted: Sep 26, 2012

- memil on September 26, 2013

Unfortunately, I deleted French VAT, but there were Rules still activating French VAT calculation. I had to disable them in addition, to gain access to custom VAT 0.21. As I've deleted main VAT tax record, I can not recreate it for now. I'll try this on new clean installation within a week.

I uninstalled Checkout progress module, cleared caches and even re-saved products, but still VAT is calculated within input price for product, not in addition, as in Commerce (probably v1.x) video. But still, VAT within indicated price is correct. I can not confirm, that this issue on differences of VAT calculation is because of Checkout progress module.

As to your suggestion on checkout, I have to go in details of your steps. Currently this is out of my concern for now, still have to deal with urgent things. But I'll add my 2 cents, if something would be found by myself to add.

- j2b on September 26, 2013