> ## Documentation Index
> Fetch the complete documentation index at: https://documentation.claruswms.com/llms.txt
> Use this file to discover all available pages before exploring further.

# How to Apply VAT to Invoices

> Learn how to apply Value Added Tax (VAT) to your invoices, including tax-inclusive and tax-exclusive options with automatic calculations.

## Applying VAT to Invoices

You can choose whether your prices are tax-inclusive or tax-exclusive, and the system will calculate VAT automatically.

<Steps>
  <Step title="Understand VAT options">
    When setting up VAT for invoices, you have two choices:

    * **Amounts Are - Tax Inclusive**: The unit prices already include VAT.
    * **Amounts Are - Tax Exclusive**: VAT is added separately to the unit prices.
  </Step>

  <Step title="Set up tax-inclusive amounts">
    If your prices already include VAT:

    * Select **Amounts Are - Tax Inclusive**.
    * Choose a VAT rate for each line item:
      * **No VAT**: No VAT will be applied.
      * **5% VAT on income**: 5% of the unit price is considered VAT.
      * **20% VAT on income**: 20% of the unit price is considered VAT.

    <Warning>The system will display the VAT amount below the invoice subtotal.</Warning>
  </Step>

  <Step title="Set up tax-exclusive amounts">
    If you want to add VAT separately:

    * Select **Amounts Are - Tax Exclusive**.
    * Choose a VAT rate for each line item:
      * **No VAT**: No VAT will be applied.
      * **5% VAT on income**: VAT at 5% will be added to the unit price.
      * **20% VAT on income**: VAT at 20% will be added to the unit price.

    <Info>The system will add the VAT amount to the total and show it below the subtotal.</Info>
  </Step>
</Steps>

## Frequently Asked Questions

<AccordionGroup>
  <Accordion title="Can I apply different VAT rates to different items on the same invoice?">
    Yes, you can apply different VAT rates (No VAT, 5%, or 20%) to each line item.
  </Accordion>

  <Accordion title="What is the difference between tax-inclusive and tax-exclusive amounts?">
    Tax Inclusive means that the unit price already includes VAT, while Tax Exclusive means that VAT is added on top of the unit price.
  </Accordion>

  <Accordion title="Can I change the VAT rate after selecting it?">
    Yes, you can change the VAT rate for each line item before finalising the invoice.
  </Accordion>
</AccordionGroup>