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Order value (excluding VAT)

Also called order value excluding VAT, commission base, net order value.

Short answer

Order value excluding VAT is the purchase amount without VAT and is the amount commission is usually calculated on in affiliate programs. A Danish order of DKK 1,000 including VAT has an order value excluding VAT of DKK 800 – 10 % commission therefore gives DKK 80, not DKK 100.

Definition of Order value (excluding VAT).

Order value excluding VAT is the order amount once the VAT has been taken out. In Denmark VAT is 25 %, so the amount is found by dividing the price including VAT by 1.25 – an order of DKK 1,000 including VAT is worth DKK 800 excluding VAT. In affiliate marketing, this is the amount the commission rate is multiplied by.

The reason is that VAT is never the store's money. The store collects it on behalf of the tax authority and passes it on. If commission were calculated on the amount including VAT, the store would pay commission on money that merely passes through: 10 % of DKK 1,000 is DKK 100, but that equals 12.5 % of the store's real revenue of DKK 800.

The commission base can be narrower than the basket itself. Shipping and fees are usually not included, and discount codes are deducted before the base is calculated – the base is what the customer actually pays for the goods, without VAT. Exactly what is included is stated in each program's terms.

How it is calculated

Order value excluding VAT = order value including VAT ÷ 1.25

1.25
the factor for Danish VAT of 25 % – use 1 + the country's VAT rate for foreign orders

Example

The customer pays
DKK 1,000
Order value excluding VAT
DKK 800
Commission rate
10 %
Commission
DKK 80

The program rate is multiplied by the DKK 800 – not by the DKK 1,000 the customer paid at checkout.

Order value including vs. excluding VAT

AspectIncluding VATExcluding VAT
What the amount iswhat the customer pays at checkoutthe store's revenue before VAT
Used forpayment, receipt, payment gatewaycommission base and accounting
Conversion in Denmarkexcluding VAT × 1.25including VAT ÷ 1.25

Always calculate expected commission on the amount excluding VAT – that is what the rate applies to.

How it goes wrong

  • 01

    The commission looks 20 % too small

    Compare the commission with the amount the customer paid and a fifth seems to be missing. 10 % of an order of DKK 1,000 including VAT gives DKK 80 – the missing DKK 20 is the VAT, which was never part of the base.

  • 02

    Shipping and discounts change the base

    A basket of DKK 600 with a DKK 100 discount and DKK 49 shipping can give a commission base of around DKK 400 excluding VAT. Do the maths before concluding that something is missing from the settlement.

  • 03

    The VAT rate is not 25 % everywhere

    The factor 1.25 applies to Danish orders. If the store sells to other EU countries, local VAT is charged – for example 19 % in Germany – and the same nominal order therefore gives a different base.

At Affilyflow

Order value (excluding VAT) in practice

At Affilyflow commission is calculated on the order value excluding VAT, and the rate is locked at the moment of the click – the rate you saw when you sent the traffic is the rate the order is settled at. The exception is the Shopify app, which calculates commission on the value of the goods without shipping, where it is not yet confirmed whether VAT has been deducted. The same order can never count twice: orders are deduplicated on order or invoice ID per program.

The affiliate gets exactly the rate the program shows. The network's fee is 20 % of the store's total price, the affiliate gets the 80 %, and the fee is not deducted from the affiliate's share.

Frequently asked questions

Why is commission calculated on the amount excluding VAT?

Because VAT is not the store's revenue – it is collected for the tax authority and passed on. Commission on the amount including VAT would in effect raise the rate by 25 % relative to the store's actual income. That is why order value excluding VAT is the usual commission base.

How do I take VAT out of an order value?

Divide the amount including VAT by 1.25 when the order is Danish. An order of DKK 1,250 including VAT is DKK 1,000 excluding VAT, and the VAT amount is the difference of DKK 250. For other countries, use 1 plus the country's VAT rate as the divisor.

Does shipping count towards the commission base?

Usually not. Commission is as a rule calculated on the value of the goods excluding VAT, while shipping and fees are left out. The exact base is stated in the program's terms, so check them if your settlements differ from your own calculation.

Is commission calculated before or after a discount code?

After. The base is the amount the customer actually pays for the goods, excluding VAT – if the customer uses a 20 % discount code, the commission base falls accordingly. That protects the store against paying commission on revenue it never received.

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