Lines and VAT that add up: rounding rules

In short

Every invoice line needs a line number, a quantity, a unit of measure, a unit price and a line amount, and quantity times price must equal the line amount. VAT is calculated once per VAT category on the total of those lines, then rounded to 2 decimals. Your accounts team sets the invoice system to calculate this way, once.

Why eInvoicing needs it

An eInvoice is checked by software before it reaches your buyer. The software adds up the lines, works out the VAT and compares the results with your totals. If your system rounds VAT line by line, or cuts amounts instead of rounding them, the totals differ by a few fils. The invoice is then rejected, or it is delivered with corrected totals that no longer match your books.

The checks are:

Check	Rule
Each line	Quantity x net unit price = line amount, at 2 decimals
Lines total	The sum of all line amounts
VAT per category	Taxable total of the category x rate, rounded half-up to 2 decimals
Invoice total	Lines total, minus allowances, plus charges, plus VAT

"Rounded half-up" means 0.005 and above rounds up: 84.755 becomes 84.76, never 84.75.

Each line also needs a unit of measure as a standard code. Printed words like "PCS" or "SQM" are not read.

Code	Unit	Example
EA	Each	Services, freight, rent (quantity 1)
H87	Piece	Spare parts, sheets
KGM	Kilogram	Spices, rice
MTR	Metre	Pipe, cable
MTK	Square metre	Tiles, veneer
LTR	Litre	Oils, chemicals
HUR	Hour	Labour charged by the hour

What good looks like

Al Noor Trading LLC invoices Gulf Spice Imports FZE for three lines at 5% VAT:

Line	Item	Quantity	Unit	Unit price	Line amount	VAT if rounded per line
1	Steel pipe	50	MTR	25.006	1,250.30	62.52
2	Gasket	10	H87	34.87	348.70	17.44
3	Delivery	1	EA	96.10	96.10	4.81
	Total				1,695.10	84.77

Method	VAT	Total
Rounded line by line (wrong)	84.77	1,779.87
Cut to 2 decimals, not rounded (wrong)	84.75	1,779.85
5% of 1,695.10 = 84.755, rounded half-up (right)	84.76	1,779.86

The eInvoice carries 84.76. An invoice printed with 84.77 differs from it by 1 fils.

For a discount, keep the line at full value and add an allowance with a reason. A 3% volume discount on line 1 is an allowance of 37.51 with the reason "Volume discount 3%". Do not change the unit price quietly or reduce the total by hand.

How to fix it in Tally

1. Check how your invoice calculates VAT. The VAT must be worked out on the total of each VAT category, not line by line. If your current setup rounds per line, ask your Tally partner to change the VAT ledger and invoice settings so VAT is calculated on the invoice total for each rate.
2. Make sure VAT is rounded to the nearest fils (half-up), not cut down.
3. In each Stock Item (Alt+G > Alter > Stock Item), set the unit to one that maps to a standard code: kg to KGM, metre to MTR, pieces to H87. Ask your Tally partner to export the code with each line.
4. Check that the amount on every line equals quantity times rate. Avoid typing over the amount after entering the rate.
5. Raise services such as freight or rent as quantity 1, with the amount as the rate.
6. Enter discounts as a separate discount ledger line with a clear name, so they export as an allowance with its reason.

How to fix it in Excel or another system

Use formulas, never typed totals:

Column	Formula or format	Example
Line amount	=ROUND(qty*price,2)	1,250.30
Unit of measure	Standard code	MTR
VAT for a category	=ROUND(SUMIF(category_range,"S",amount_range)*5%,2)	84.76
Invoice total	=lines_total-allowances+charges+VAT	1,779.86

Do not add up a per-line VAT column to get the VAT total. Excel's ROUND already rounds half-up.

If you use an ERP, ask your ERP partner to calculate VAT per category on the invoice total and to map each unit of measure to a standard code.

Checklist

• Every line has a line number, quantity, unit code, unit price and line amount.
• Quantity x price = line amount on every line, at 2 decimals.
• VAT is calculated per category on the lines total and rounded half-up.
• Services use quantity 1 and unit EA.
• Discounts show as allowances with a reason.

The law

• Peppol PINT AE business rules: IBR-023 (each line has a unit of measure code), IBR-024 (each line has a line net amount), IBR-CL-23 (unit codes from UN/ECE Recommendation 20 with Recommendation 21), IBR-088 (price base quantity unit equals the invoiced quantity unit), IBR-CO-10 (sum of line net amounts), IBR-CO-14 (total VAT = sum of category VAT), IBR-CO-15 (total with VAT = total without VAT + VAT), IBR-033 and IBR-042 (allowances carry a reason), IBR-123 to IBR-125 (totals at no more than 2 decimals). PINT AE business rules
• Peppol PINT AE rule ALIGNED-IBRP-S-09: the standard rated category VAT (IBT-117) equals its taxable amount (IBT-116) times the rate (IBT-119). PINT AE rule ALIGNED-IBRP-S-09
• UN/ECE Recommendation 20 unit codes (EA, H87, KGM, MTR, MTK, LTR, HUR). Peppol code list UNECERec20
• MoF UAE Electronic Invoicing Guidelines, section 12.2 item 5: rounding applies at invoice total level, to 2 decimal places. MoF PDF