Incorrect tax calculation systematically

[ValGMB]

I have just noticed that for all the orders, Shopify has wrongly calculated the VAT. For instance, in France, the rate is 20%.

For the following order, the total was 580 EUR. 20% of that is 0.2 * 580 = 116

Why was only 96.67 EUR displayed as VAT ??? Despite showing the correct rate, the calculation was wrongly done. This problem seems to go back to at least 2022, meaning all of our VAT has been incorrectly calculated across hundreds of orders. We use this value to automatically generate invoices. This is a huge problem.

[Summer · Accepted solution]

Hey, @ValGMB!

I would like to clarify this tax concern for you. Essentially, the VAT amount would not be €116 in this case. This is because tax is included in the product price. 

In order to find out the VAT, you will need to find out the tax-exclusive price of this product. To calculate the tax-exclusive price, you will need to take the product price and divide it by one plus the tax rate. This is illustrated by the following formula:

product price / (1+ tax rate) = tax-exclusive price

Considering the information from the screenshot you shared, this would be the calculation:

580 / (1+ .20) = tax-exclusive price

580 / 1.20 = €483.33

Once you have your tax-exclusive price, you can use this figure to multiply by .20, which is your tax rate, to find out the VAT.

tax-exclusive price x .20 = VAT

580 / .20 = €96.67

€96.67 is the VAT amount, as stated on the order summary.

In case you're unfamiliar with the 'tax-included' setting, this is an optional checkbox that is manually checked by the store owner within the admin. You can go to Settings > Taxes and duties > Global settings to find it.

If you would like to charge tax on top of the product price, you will need to ensure this box is unchecked.

Let me know if anything I've discussed is unclear, and I would be happy to provide further clarification.

[ValGMB]

Hello, thanks for the reply.  Indeed, it was a misunderstanding on my part.

You are correct.

Thanks for your reply and for clearing things up !