Overview
Tax in QBM is not controlled by one percentage or one rounding option. The final result depends on the company VAT settings, the Tax Code selected on the transaction, the linked Tax Item, the taxable amount, discount treatment, whether prices include VAT, decimal precision, and the type and date of the document.
This guide explains that complete flow. It also keeps the detailed decimal answer: QBM is not limited to two decimals for normal sales and purchase tax amounts, but calculation precision and final currency precision must be configured together.
SetupTax Items, Tax Codes, defaults, TRN, agency, liability account, and periods
TransactionParty, item, price, discount, category, rate, taxable base, and rounding
ControlReview, reports, corrections, return, payment, printing, and e-invoicing
Precision answer: For three-decimal tax amounts, set Options > VAT > Rounding Digit to 3 and Options > General > Currency - Amount to 3. The same pattern supports four decimals.
Important: A mathematically correct rate can still produce the wrong accounting treatment if the Tax Code, category, inclusive-price option, discount rule, transaction date, or tax period is wrong. Review the entire tax setup, not only the total.
The QBM Tax Lifecycle
| Stage | What Happens | Main Control |
|---|---|---|
| 1. Company setup | Enable sales and purchase tax, enter the company TRN, choose discount and inclusive-price behavior, set defaults, precision, and tax periods. | Options > VAT and Options > General |
| 2. Tax master data | Create Tax Items with the correct rate, category, tax agency, and liability account; then link them through Tax Codes. | Tax Item List and Tax Code List |
| 3. Transaction entry | Choose the customer or vendor, enter items or expenses, and review the tax code, price, quantity, discount, and date. | Sales, purchase, credit, refund, delivery, and receipt documents |
| 4. Calculation | QBM determines the taxable base, applies the linked rate, rounds line tax, and calculates the document tax total. | Tax configuration plus the saved transaction values |
| 5. Review and correction | Review tax transactions and reports; use credits, refunds, tax adjustments, or reverse-charge tools when a controlled correction is required. | Tax lists, transaction reports, and dedicated correction screens |
| 6. Return and settlement | Prepare the VAT return using the approved period and basis, record tax payment, and close periods only after review is complete. | VAT Return and Pay Tax |
| 7. Customer and authority output | Print, PDF, email, or electronically submit the saved document using the required legal details and output precision. | Approved print template and regulated e-invoicing workflow |
Core Tax Concepts
These values work together but have different purposes:
| Value | Meaning | Why It Matters |
|---|---|---|
| Tax Code | The transaction-facing selection used on sales and purchase lines or documents. | It connects the transaction to the appropriate linked sales and purchase Tax Items. |
| Tax Item | The setup record holding the tax percentage, category, agency, and liability account. | It provides the calculation and posting details behind a Tax Code. |
| Tax category | The reporting treatment, such as standard-rated, zero-rated, reverse charge, or exempt. | Two transactions can both show zero tax but belong in different return categories. |
| Tax percentage or rate | The percentage entered on the Tax Item, such as 5%, 7.5%, or 15%. | The rate is applied to the taxable base; it is separate from decimal precision. |
| Taxable base | The amount to which the tax percentage is applied after considering quantity, price, discounts, and inclusive-price treatment. | An incorrect base produces an incorrect tax amount even when the rate is correct. |
| Calculated line tax | The tax amount calculated for one taxable line and rounded using the VAT Rounding Digit. | Line-by-line rounding can differ slightly from rounding the whole invoice once. |
| Invoice tax total | The sum of the applicable line tax amounts, shown using the general currency amount precision. | This is the tax total normally printed and saved with the document. |
| Tax agency and liability account | The authority or agency record and the account used for tax posting and settlement. | Correct tax calculation does not replace correct accounting setup. |
| TRN and tax period | The company tax registration number and the date range used for review and filing. | They affect legal output, return identification, and period-based review. |
Key point: Changing Rounding Digit changes the calculated tax amount only. It does not change the Tax Item percentage, category, agency, liability account, transaction date, or tax period.
Company Tax Settings
Tab Path: Options > VAT
Authorized users should review the complete VAT tab before changing live tax behavior. The settings are company-wide and can affect many document types.
| Setting | Purpose | Operational Guidance |
|---|---|---|
| Use sales tax | Activates tax handling on customer sales transactions. | Enable it when the company records output VAT or sales tax. |
| Use purchase tax | Activates tax handling on vendor purchase transactions. | Enable it when the company records input VAT or purchase tax. |
| Apply tax after discount | Reduces the taxable base by the applicable discount before tax is calculated. | Use when the approved tax rule taxes the discounted consideration. |
| Apply tax before discount | Calculates tax using the amount before the applicable document discount. | Use only when this matches the approved accounting and legal treatment. |
| Default is taxable if tax code is not applied | Allows QBM to fall back to an available taxable code when item and default tax codes are not available. | Use carefully; it prevents unintended untaxed entries but can also apply the wrong treatment if defaults are poorly maintained. |
| Default Item, Customer, and Vendor Tax Codes | Provide company defaults when a more specific tax-code assignment is absent. | Treat them as entry assistance, not a replacement for reviewing each transaction. |
| Show customer and vendor tax codes | Makes the related tax-code selection visible on supported documents. | Enable when users need to review or change party-level tax treatment during entry. |
| Sales prices include VAT | Treats entered sales prices as VAT-inclusive instead of adding VAT on top. | Choose one pricing policy and test price lists, POS, invoices, discounts, and printed totals. |
| Purchase prices include VAT | Treats entered purchase prices as VAT-inclusive instead of adding VAT on top. | Use when supplier prices are normally entered gross of VAT. |
| Apply Tax at Item Delivery | Also calculates and applies tax when items are delivered, before the final sales invoice. | Enable only when the delivery workflow requires tax at that stage; tax still applies on the final invoice. |
| Apply Tax at Item Receipt | Also calculates and applies tax when supplier items are received, before the final purchase invoice. | Enable only when the receipt workflow requires tax at that stage; tax still applies on the final supplier invoice. |
| Tax Registration Number (TRN) | Stores the company's tax registration identifier. | Keep it accurate for invoices, returns, and regulated output. |
| Excise Tax | Enables excise-tax handling where the company uses supported excise workflows. | Enable only for an approved excise-tax process. |
| Tax periods | Maintains reporting periods used for tax review and control. | Align periods with the company's registered reporting frequency and filing process. |
Decimal Precision Settings
Tax calculation precision and general currency precision are separate. They must agree when the invoice must retain more than two tax decimals.
| Setting | Purpose | Recommended Value |
|---|---|---|
| Options > VAT > Rounding Digit | Controls how many decimal places QBM keeps when rounding the calculated tax amount for a normal transaction line. | Set it to 2, 3, or 4 according to the approved tax requirement. |
| Options > General > Currency - Amount | Controls the decimal places used for general monetary totals, including the final tax total shown and saved on ordinary invoices. | Set it to the same number as the VAT Rounding Digit when the invoice must retain that precision. |
Global effect: These are not per-user or per-invoice preferences. Currency - Amount affects monetary totals throughout QBM, not only VAT. Review invoices, purchases, credits, refunds, reports, receipts, and printed documents before rollout.
Tax Categories and Treatments
Where UAE tax categories are used, the Tax Item category tells QBM how the transaction should be classified. The category and percentage must both be correct.
| Category | General Purpose | Important Distinction |
|---|---|---|
| SR — Standard Rate | Normal taxable supplies or purchases at the applicable standard percentage. | Confirm the linked sales and purchase Tax Items use the correct approved percentage. |
| ZR — Zero-Rated | Taxable activity reported at a zero percentage where the legal conditions are met. | Zero-rated is not the same as exempt even though both can calculate a zero tax amount. |
| RC — Reverse Charge | Transactions handled under the reverse-charge mechanism. | Use the dedicated reverse-charge workflow and required supporting evidence. |
| EX — Exempt Supplies | Supplies legally classified as exempt. | Do not replace an exempt category with a zero-rated code merely because both show zero tax. |
| IG — Intra-GCC | Relevant GCC cross-border treatment where applicable. | Use only after confirming the jurisdiction, party status, and current legal treatment. |
| OA — Output Tax Amendment | Approved amendments affecting output tax. | This is a correction classification, not a routine sales category. |
| IA — Input Tax Amendment | Approved amendments affecting input tax. | This is a correction classification, not a routine purchase category. |
Classification warning: QBM provides the categories, but the business remains responsible for choosing the legally correct treatment and retaining any required exemption, reverse-charge, or cross-border evidence.
How Tax Codes and Defaults Affect a Transaction
Depending on the document and visible controls, QBM can obtain a tax code from an item, a customer or vendor, a company default, or a manual selection. Users should review the final code on the transaction instead of assuming the suggested code is correct.
| Possible Source | How It Helps | Risk to Review |
|---|---|---|
| Item tax-code assignment | Applies the normal tax treatment configured for that product or service. | The item setup may be outdated or inappropriate for a special customer, supplier, or transaction. |
| Customer or vendor tax code | Supports party-specific treatment where the document exposes that control. | Party treatment does not automatically prove that every item on the document has the same treatment. |
| Default Item Tax Code | Provides a fallback when an item has no specific code. | A broad default can hide incomplete item setup. |
| Default Customer or Vendor Tax Code | Provides a sales-side or purchase-side fallback. | It may not match a special transaction, exempt party, reverse charge, or cross-border case. |
| Default is taxable | Uses an available taxable code when no more specific code is available. | It can prevent missing tax, but it can also tax a transaction that needs another category. |
| Manual document or line selection | Allows the authorized user to apply the intended treatment for the current transaction. | The user must understand why the code is being changed and should not use a code only to force a desired total. |
Good practice: Maintain item and party tax assignments, keep defaults conservative, show tax-code controls to users who must review them, and confirm every exceptional transaction before saving.
Tax Calculation Order
- QBM identifies the final Tax Code and linked sales or purchase Tax Item for the line.
- The Tax Item supplies the percentage, category, agency, and posting setup.
- QBM determines whether the entered price is tax-inclusive or tax-exclusive.
- Quantity, price, and applicable line or document discounts determine the taxable base.
- QBM applies the Tax Item percentage to the taxable line amount.
- The calculated tax for the normal item line is rounded to the configured VAT Rounding Digit.
- The applicable line tax values are added, and the invoice tax total uses the general Currency - Amount precision.
Rounded line tax = round(taxable line amount × tax percentage ÷ 100, VAT Rounding Digit)QBM uses normal midpoint rounding away from zero. For example, 1.235 rounded to two decimal places becomes 1.24. A credit value of -1.235 becomes -1.24.
Why totals may differ from a calculator: QBM normally rounds tax line by line and then adds the rounded values. A calculator that adds all taxable values first and rounds only once can produce a small difference.
Calculation Examples
Decimal Rounding Example
Assume one taxable invoice line is 15.375 and the Tax Item percentage is 5%.
15.375 × 5 ÷ 100 = 0.76875| VAT Rounding Digit | Rounded Line Tax | Required Currency - Amount |
|---|---|---|
| 2 | 0.77 | 2 |
| 3 | 0.769 | 3 |
| 4 | 0.7688 | 4 |
| 5 | 0.76875 during calculation | Limited—do not assume five decimals will remain unchanged in every transaction detail or output. |
Two Identical Lines
If the invoice contains two identical lines, QBM rounds each line first and then totals the results:
| Precision | Line 1 | Line 2 | Invoice Tax Total |
|---|---|---|---|
| 2 decimals | 0.77 | 0.77 | 1.54 |
| 3 decimals | 0.769 | 0.769 | 1.538 |
| 4 decimals | 0.7688 | 0.7688 | 1.5376 |
Tax-Exclusive vs Tax-Inclusive Price
Assume a 5% rate and no discount:
| Pricing Setting | Entered Price | Tax Treatment | Document Total |
|---|---|---|---|
| Price excludes VAT | 100.00 | Tax of 5.00 is added to the entered price. | 105.00 |
| Price includes VAT | 105.00 | The 5.00 tax portion is included within the entered gross price. | 105.00 |
Pricing caution: Changing an inclusive-price option changes how entered prices are interpreted. Test price lists, POS, invoices, purchases, discounts, and print output before changing it for a live company.
Tax Before vs After Discount
Assume a price of 100.00, a document discount of 10.00, and a 5% rate:
| Discount Setting | Taxable Base | Tax | Total After Discount and Tax |
|---|---|---|---|
| Apply tax after discount | 90.00 | 4.50 | 94.50 |
| Apply tax before discount | 100.00 | 5.00 | 95.00 |
Do not choose by preferred total: The before/after-discount setting must follow the company's approved tax treatment. It is not a per-invoice rounding adjustment.
Supported Precision Matrix
| Requested Tax Decimals | Status | Guidance |
|---|---|---|
| 2 | Supported and default | Use the standard setup when the currency and tax rules require two decimals. |
| 3 | Supported | Set both VAT Rounding Digit and Currency - Amount to 3. |
| 4 | Supported | Set both values to 4 and verify all required reports and print templates. |
| 5 | Selectable but limited | The calculation setting accepts 5, but not every transaction-line value or output preserves five decimals. Use only after a complete acceptance test. |
| More than 5 | Not supported by the VAT setting | QBM does not provide an arbitrary x-digit VAT rounding option above 5. |
| 0 or 1 | Not available in the VAT setting | The VAT Rounding Digit starts at 2. |
Tax Behavior by Document Type
| Document or Tool | Tax Role | What Users Should Review |
|---|---|---|
| Customer Invoice | Records customer sales and the related output tax. | Customer, invoice date, item lines, tax code, rate, discount, taxable amount, tax total, and legal output details. |
| Sales Receipt | Records a sale and payment together while still applying the sales-side tax treatment. | Use the same line-level tax review as an invoice and confirm the receipt/print result. |
| Purchase Invoice | Records supplier costs and the related input tax on item and supported expense lines. | Vendor, supplier document number, date, item or expense tax code, discount, recoverable treatment, and tax total. |
| Quote or Order | Can show expected tax before the final sales or purchase transaction. | Confirm the code and price basis transfer correctly when converting to the final document. |
| Item Delivery or Item Receipt | Can apply tax at the delivery or receipt stage when the related Options setting is enabled. | Check whether the company intends tax at that stage and confirm conversion to the final invoice does not create an unexpected result. |
| Customer Credit, Refund, or Vendor Credit | Reduces or reverses value and related tax when correcting or returning a prior transaction. | Reference the original transaction and use matching tax code, category, rate, date policy, and amounts unless an approved reason requires otherwise. |
| Tax Adjustment | Records a controlled correction to tax when a normal transaction document is not the correct method. | Use the correct input or output side, account, date, period, reference, explanation, and approval. |
| Reverse Charge | Handles reverse-charge tax separately from a routine standard-rated invoice. | Use the dedicated workflow and verify the category, evidence, accounts, period, and return effect. |
| VAT Return and Pay Tax | Reviews reportable activity and records settlement; these screens are not substitutes for correct source transactions. | Basis, period, totals, drill-down transactions, tax agency, liability/payable accounts, payment, and close-period decision. |
Correction control: Do not edit a posted historical document simply to make a report match. Use the approved credit, refund, adjustment, or reverse-charge workflow and retain the reason and reference.
Tax Periods, Reports, and Return Review
A correct invoice is only the first stage. QBM also provides lists, reports, return review, and settlement tools to trace how tax reaches the reporting period.
| Review Area | Use It For | Questions to Ask |
|---|---|---|
| Tax Code and Tax Item Lists | Review active setup records and linked rates/categories. | Are obsolete codes inactive? Are the sales and purchase items, agency, and liability account correct? |
| Tax Transactions | Trace the source documents contributing tax activity. | Are dates, parties, codes, taxable values, and tax amounts complete? |
| Input and Output Tax Reports | Explain purchase-side and sales-side tax totals. | Do report totals reconcile to source transactions and the liability accounts? |
| Unassigned Tax Transactions | Find activity missing a complete tax assignment. | Is the source transaction missing a Tax Code or linked Tax Item? |
| Sales Tax Liability Report | Review tax liability activity and supporting transactions. | Does the liability agree with the transaction and return review? |
| VAT Return | Calculate and review the selected period using the approved cash or accrual basis. | Are the dates, basis, sales, purchases, output tax, reclaimed input tax, amendments, and tax payable correct? |
| VAT Return by Emirates | Review emirate-level reporting where required. | Are customer, branch, supply-location, and transaction classifications complete? |
| Pay Tax and Close Periods | Record the settlement and optionally lock completed periods. | Has the return been approved, payment confirmed, accounts reviewed, and correction work completed? |
Cash vs accrual: The reporting basis can change which transactions are included in a period. Always use the basis approved for the company and investigate differences through the detailed tax transactions.
Printing, Existing Records, and Regulated Outputs
- New and recalculated transactions: The saved company settings apply when QBM calculates or recalculates tax.
- Existing invoices: Changing the settings does not automatically rewrite historical saved or posted invoices.
- Saved source values: Confirm the transaction before printing. A print template presents the saved values; it should not be used to hide an incorrect Tax Code, rate, taxable base, or total.
- Customized print templates: A template may have its own number format. If the screen shows three decimals but the printed invoice shows two, review the template format.
- Print language and direction: The selected print template controls its language and direction. Changing template language does not change the Tax Code, percentage, category, or calculated amount.
- Legal identity: Confirm company and party names, addresses, TRNs, document number, date, currency, and any required supply details before sending the invoice.
- Special tax evidence: Exempt, reverse-charge, zero-rated, and cross-border transactions may require category-specific reasons or supporting information in regulated output.
- Regulated electronic invoices: Some legal electronic-invoice formats require monetary values to be sent with two decimals. That required output precision can remain fixed even when the QBM transaction screen uses more decimals.
- Tax reports and posting: Test VAT reports, transaction reports, and accounting postings before changing precision for live work.
Compliance reminder: The applicable tax authority, currency rule, and electronic-invoice specification take priority over a display preference. Confirm the required precision before changing a live company.
Recommended Setup and Change Procedure
- Document the approved tax design: jurisdictions, registrations, reporting frequency and basis, categories, rates, inclusive/exclusive pricing, discount treatment, and required precision.
- Create or verify the tax agency and liability accounts before configuring Tax Items.
- Create Tax Items with the correct percentage, category, agency, and liability account; then create Tax Codes linked to the correct sales and purchase items.
- Open Options > VAT and review sales/purchase activation, defaults, visibility, taxable fallback, discount basis, inclusive pricing, TRN, delivery/receipt timing, excise, rounding, and tax periods.
- If more than two decimals are required, set Options > VAT > Rounding Digit and Options > General > Currency - Amount to the same approved value.
- Create sample standard-rated, zero-rated, and exempt transactions as applicable, plus any required reverse-charge or cross-border scenario.
- Test a sales invoice, sales receipt, purchase invoice, discount, inclusive-price case, credit/refund, delivery/receipt flow, and correction method used by the company.
- Compare line tax, taxable amount, invoice tax total, grand total, accounting effect, print/PDF output, tax transactions, reports, and VAT return drill-down.
- Validate regulated electronic-invoice output separately because its mandatory fields and decimal rules may differ from the normal screen and print template.
- Record approval and apply the setup to normal work only after finance accepts the complete sample results.
Recommended control: Avoid changing rates, categories, inclusive pricing, discount basis, defaults, or decimal precision in the middle of a reporting period unless the business has approved how earlier and later transactions will be reconciled.
Troubleshooting
| What You See | Likely Reason | What to Check |
|---|---|---|
| No tax appears on a sales or purchase transaction. | Sales/purchase tax may be disabled, the selected code may be non-taxable, or the item and defaults may not provide a usable code. | Check Options > VAT, the visible document/line code, item setup, party setup, company defaults, and the linked Tax Item. |
| An unexpected tax code appears automatically. | The code may come from the item, customer/vendor, company default, or taxable fallback. | Review every possible source and confirm the final line/document selection before saving. |
| VAT is added on top when the entered price was meant to include it. | The applicable sales or purchase prices-include-VAT option may be off. | Confirm the company pricing policy and test the inclusive-price setting before changing live transactions. |
| Tax after a discount is higher or lower than expected. | The company may be configured to apply tax before discount instead of after discount, or the wrong discount level was used. | Review the VAT discount setting, line discount, document discount, and resulting taxable base. |
| Tax appears during delivery or item receipt. | Apply Tax at Item Delivery or Apply Tax at Item Receipt is enabled. | Confirm whether the company's workflow intends tax at that stage and review the final invoice conversion. |
| Zero-rated and exempt transactions both show zero tax. | The numeric amount can be the same even though the reporting categories are different. | Review the Tax Item category and use the legally correct classification. |
| A transaction appears in the wrong VAT return period. | The document date, selected return dates, cash/accrual basis, payment timing, or tax period may differ from expectation. | Trace the source transaction through Tax Transactions and the return drill-down using the approved reporting basis. |
| A transaction appears as unassigned tax activity. | The source document may be missing a complete Tax Code or linked Tax Item setup. | Open the source transaction and verify its code, linked item, category, agency, and accounts. |
| A credit or refund does not match the original tax. | The correction may use a different code, category, rate, price basis, discount, date policy, quantity, or precision. | Compare the correction line by line with the original and use the approved correction date and reference. |
| Line tax is calculated with three decimals, but the invoice tax total shows two. | VAT Rounding Digit is 3 while Currency - Amount is still 2. | Set both values to the required precision. |
| The screen shows three decimals, but the printed invoice shows two. | The print template uses a two-decimal number format, or the output follows a regulated fixed format. | Review the print template and confirm whether the output has mandatory legal precision. |
| The tax total differs slightly from a one-step calculator result. | QBM rounds each normal line tax before adding the invoice tax total. | Recalculate line by line using the configured precision. |
| Five decimals were selected, but a saved or reported detail has fewer decimals. | Five-decimal calculation is not lossless across every transaction detail and output. | Use no more than four decimals for consistent transaction processing. |
| Old invoices still show their previous tax amounts. | Changing Options does not automatically rewrite historical documents. | Test with a new sample document; do not alter posted history without approved accounting procedures. |
| The percentage field still has its original format. | Tax percentage entry and tax amount rounding are separate. | Confirm whether the requirement concerns the rate or the calculated amount. |
Key Points
- Tax results depend on the selected Tax Code and linked Tax Item, category and rate, taxable amount, discount rule, inclusive or exclusive pricing, defaults, document type and date, rounding, and currency precision.
- Three-decimal tax amounts require both Options > VAT > Rounding Digit and Options > General > Currency - Amount to be set to 3. The same pattern supports four decimals.
- Five decimals are selectable for calculation but are not guaranteed to remain unchanged across every transaction detail, report, or regulated electronic-invoice output.
- Changes to tax setup should be validated across sales, purchases, discounts, inclusive pricing, credits and refunds, reports, VAT returns, printed output, and regulated electronic invoicing before live use.
- Changing company tax settings does not automatically rewrite historical invoices.