Inclusive Pricing Calculation

Problem Statement

This article helps you understand inclusive pricing calculation.

Solution

Scope

How is inclusive pricing calculated?

Calculate inclusive pricing when the origin country is given.

The next billing amount differs due to inclusive pricing calculation. Why?

Basic calculation - when we have inclusive taxation applied on subscriptions with and without the origin country.

Solution

Consider that you are based in the EU region and selling digital goods at a price of €100 per month. Your origin country is Belgium with tax configured at 21%. You are selling in the EUR Currency that is configured to be Tax Inclusive, and the origin EU region is set to be Tax Exclusive.

A customer's shipping address is in France; the end customer is not a business and therefore does not have a VAT number. The tax rate for this customer's invoice is calculated as follows:

France tax rate = 24%

Since the currency is inclusive, the €100 price of the plan is inclusive of taxes.

Actual price of the plan = €100/1.2 = €83.33

Since the region prices are exclusive of tax, a tax rate of 24% for the France region gets applied to the actual price of the plan, €83.33.

Invoice total = €83.33*1.24 = €103.33

€83.33 = subtotal

€20 = Taxes

Tip: The tax present in the origin country should be applied to the unit amount before calculating taxes.

eg:

Org address Canada: Ontario

Price type $USD - origin country Canada [inclusive]

Tax for Canada [Exclusive]

Ontario - 10%

Alberta - 20%

Customer

address - Alberta

Charge - $100

Merchant - Ontario - inclusive tax amount - $100 of 10% -- $88.50

Customer - Alberta - exclusive tax 20% on $88.50 - $17.70

Invoice:

Net Amount (excluding tax)

$88.50

Tax (20.0%)

$17.70

Gross Amount (including tax)

$106.20

If Canada is configured as Inclusive, then

Charge - $100

Merchant - Ontario - inclusive tax amount - $100 of 10% -- $88.50

Customer - Alberta - inclusive tax 20% on $88.50 - $14.75

Net Amount (excluding tax)

$73.75

Tax (20.0%)

$14.75

Gross Amount (including tax)

$88.50