When you generate an invoice using Qonto, you might notice a slight variation in the VAT amount, often just a few cents. This difference isn't a software glitch but a recognized accounting practice designed to comply with official guidelines.
Why is VAT rounded?
VAT calculations can sometimes result in fractions of a cent, such as 0.001 or 0.0001. Since accounting standards require rounding these amounts to the nearest tenth of a cent, Qonto applies these rules to ensure all calculations align with regulatory standards.
How does VAT rounding work?
At Qonto, we use the "sum of the roundings" method. This approach rounds the VAT for each individual product line before summing them up, providing greater precision and transparency. Let’s compare this method to an alternative approach:
Example: Qonto's sum of the roundings method
Imagine a company, "Tech Supplies," selling the following items:
- A laptop priced at €849.99 before VAT
- A mouse priced at €25.75 before VAT
Both items are subject to a VAT rate of 20%:
- Laptop VAT: €169.998, rounded to €170.00
- Mouse VAT: €5.15, rounded to €5.15
The total invoice amount including VAT becomes:
- Laptop: €849.99 + €170.00 = €1019.99
- Mouse: €25.75 + €5.15 = €30.91
The overall total is €1050.90.
Example: Rounding the sum method
Using the same products:
- Total pre-VAT: €849.99 + €25.75 = €875.74
- Total VAT: €875.74 x 20% = €175.148, rounded to €175.15
- Total including VAT: €875.74 + €175.15 = €1050.89
As you can see, there’s a minor difference due to the rounding method.
Why does Qonto use the sum of the roundings method?
Qonto prefers this method for its precision in calculating VAT at the line-item level. This ensures clearer, more transparent invoices for our clients, especially when handling multiple product lines.
For more details on VAT rounding practices in France, refer to these official resources:
- The French tax authority website: impots.gouv.fr
- French Tax Code, Article 1724: legifrance.gouv.fr
These documents provide comprehensive insights into VAT compliance.
At Qonto, we are committed to ensuring your invoicing is both accurate and aligned with French regulations. If you have any questions or need further assistance, feel free to contact our customer service team.