VAT Calculation In ERP

Hi,

We sold 3 items to a customer each item price is AED2,000.00, with total sales invoice amount of AED6,000.00. we gave sales discount of AED (1,000.00) which was deducted from the Sub-Total, so the total sales invoice amount will be AED 5,000.00. Then we can only charge the 5% VAT, but the calculation for the VAT is not correct since it did not calculate after the sales discount has been made. When we charged the 5% VAT, the amount is AED300.00 which means it was calculated from AED6,000.00. the correct amount should be AED250.00 since we gave discount and the total sales invoice amount will be AED5,000.00.

Can you please advise any solution for this issue?
Item 1 AED 2,000
Item 2 AED 2,000
Item 3 AED 2,000
SUB Total AED 6,000
Discount AED ( 1,000)
Total Without VAT AED 5,000
5% VAT AED 300
GRAND Total AED 5,300

Check out Sales Taxes and Charges Template and add your template for VAT

I agree with @irene , the order should be

  • positions -> net total
  • less discount --> net total before taxes
  • then add taxes and charges

Even if selecting VAT on net total, it will calculate VAT before the discount…

A workaround: add an item “Discount” which has a negative selling price…

choosing Net total on additional discount on will calculate what you want, less discount --> net total before taxes, then add taxes.