Every invoice, estimate and credit note has an Amounts are setting with two choices. It tells Avaza whether the unit prices you enter already include tax.
- Tax Exclusive: your prices are before tax. Avaza adds the tax on top, so your customer pays the price plus tax.
- Tax Inclusive: your prices already include tax. Avaza works out the tax inside them, so the total is the same as the prices.
The same unit price gives a different total, and leaves you a different amount before tax. Choose the setting that matches how you quote your prices. If you're not sure what your customers or your local tax rules expect, ask your accountant.
A worked example
One invoice line: quantity 1, unit price 100.00, a 5% discount and a 10% tax.
Tax Exclusive | Tax Inclusive | |
|---|---|---|
Discount (5% of 100.00) | 5.00 | 5.00 |
Line amount (the Amount column) | 95.00 | 95.00 |
Amount before tax | 95.00 | 86.36 |
Tax (10%) | 9.50 | 8.64 |
Total Amount | 104.50 | 95.00 |
With Tax Exclusive, the tax is 10% of 95.00, added on top. With Tax Inclusive, 95.00 already includes the tax: 95.00 ÷ 1.10 = 86.36 before tax, and the difference of 8.64 is the tax. Your customer pays 9.50 less, and you keep 8.64 less before tax.
The totals at the bottom of the invoice show it like this:
- Tax Exclusive: Total Discount 5.00, Subtotal 95.00, + Tax of 9.50, Total Amount 104.50.
- Tax Inclusive: Includes Tax of 8.64, Total Discount 5.00, Subtotal 95.00, Total Amount 95.00.
The formulas
Avaza works out every line like this:
Figure | Tax Exclusive | Tax Inclusive |
|---|---|---|
Discount | Qty × Unit Price × Disc % | Qty × Unit Price × Disc % |
Line amount | Qty × Unit Price − Discount | Qty × Unit Price − Discount |
Tax | Line amount × tax rate | Line amount × tax rate ÷ (1 + tax rate) |
Amount before tax | Line amount | Line amount − Tax |
Total for the line | Line amount + Tax | Line amount |
Each figure is rounded per line to the decimal places of the invoice's currency, and the invoice totals add up the rounded lines. How tax is calculated on invoices and estimates explains the rounding, where each line's tax comes from, and taxes with more than one component.
Choose the setting
Set a default once, then change it on an invoice when you need to. Only Administrators and Finance Managers can change the settings and create invoices, estimates and credit notes.
Go to Settings › Invoice & Bill Settings. In the Sales area, set Show Amounts as to Tax Exclusive or Tax Inclusive, then click Save.
New invoices, estimates, credit notes, recurring invoices and retainer invoices start with this setting. Existing ones don't change.To change a single invoice, edit it and choose Amounts are, below Invoice Template.
Changing Amounts are keeps your unit prices and changes the totals, so check the Total Amount before you send the invoice.
Bills have their own Show Amounts as default, in the Bills area of the same page.
Time, expenses and fixed amounts
- Time and fixed amounts use the billable rate or the fixed amount as the unit price, whichever setting the invoice has. So on a Tax Inclusive invoice, a rate of 100.00 an hour includes the tax.
- Expenses are adjusted for you when you click Add Expense. On a Tax Exclusive invoice, the line price is the expense amount before tax. On a Tax Inclusive invoice, it's the full amount, including tax. Each expense line keeps the expense's own tax. Because this happens when the lines are added, set Amounts are first. See invoicing time, expenses and fixed amounts. For why an expense can show a different amount on the invoice than in reports, see expense amounts on invoices and in reports.
Expenses have the same choice. When you record an expense and pick a tax above 0%, Tax Inclusive and Tax Exclusive appear under Tax. Tax Inclusive is selected by default. With Tax Exclusive, Avaza adds the tax to the amount you type, and saves the expense with the total including tax.
How the tax shows on the invoice
Your invoice template decides how tax appears on the web view and PDF. In Settings › Invoice & Bill Settings, click the template under Invoice & Quote/Estimate Templates and open its Layout tab:
- How are Tax Totals Displayed? With Single Tax Subtotal, the totals show the one + Tax of or Includes Tax of row described above. Other options list each tax rate or tax component on its own row instead. Don't display tax shows no tax rows, but the Total Amount stays the same.
- Override Invoice Labels › Footer & Totals: rename + Tax of and Includes Tax of, for example to "VAT".
See invoice and estimate templates for the other layout options.
In reports
The Tax Summary report and the Transaction Item List report take the tax off tax-inclusive lines first. Their amounts before tax mean the same thing, whichever setting each invoice used.