DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

Invoices with Security Deposit that will be returned to customer


#1

Can you do something about invoices with items that are held for a certain period of time and then refunded to customers? ie. Security deposit for a rental service or product which has a security deposit which will be returned to the customer. I have tried to skip VAT but I think the system calculates it wrong.

I take it that no VAT should be charged since this is a fixed amount that will be returned to the customer when the service is completed.


#2

Sorry, but I’m not sure what exactly is the problem. If you are not supposed to charge VAT on deposits as per your country-specific VAT legislation, then don’t charge VAT on deposits.


#3

I will give an example with the figures I have tried. I ticked Vat inclusive and then marked VAT only for the service which is 90 euros and includes 19% VAT. Then on the second line is the Deposit for 20 euros without VAT.

In totals it gives me the total of 110 but in the VAT box it says 14.37 euros instead of 17.10 which is the 19% on 90. I think it calculates it wrong unless I am doing something wrong.


#4

It calculates correctly. 90 euros is your VAT inclusive price right? Then VAT portion will be

90 ÷ 119 × 19 = 14.37 euros

Why?

Your tax rate of 19% refers to the amount of tax paid as a proportion of the pretax value of whatever is taxed. So if 90 euros is your VAT inclusive price, you need to first determine what is your VAT exclusive price and only then apply 19% tax.

So VAT-exclusive price of 90 euros will be 90 ÷ 119 × 100 = 75.63 euros. Now calculate 19% VAT on 75.63 euros and you will get again 14.37 euros

Hope it makes sense, there is plenty of stuff about this on the Internet. It’s common misunderstanding which often results in overpaying VAT because tax-inclusive tax rate is always lower than its tax-exclusive tax rate equivalent.

In your case, you would end up paying government out of your profits 3 euros in VAT on each sale than necessary.


#7

i get it what you mean. I actually studied accounting at school but i have not used it for a decade. Of course paying more vat to the government is something we all want to avoid, I was calculating it wrong but your explanation clarifies it better so thank you


#8

I didn’t mean to patronize you. I remember this issue coming up a lot so I thought I’ll write more comprehensive answer and then point other people to it in future.


#9

haha no patronising here. its very kind you actually reply and clarify things for us. and thank you for doing so :slight_smile: