Discount Calculator

A discount works in three directions: the discount amount, the price after the discount, and the rate itself when all you have are the two prices. The calculator above covers all three, and it can add sales tax on top of the discounted price at your country’s rate.

The discount formula

The discount formula never changes; only which number you are missing does. Any discount involves three figures: the original price, the discount rate, and the price after the discount. Know two and you can derive the third, which is exactly how the calculator’s three modes work.

A percentage means “per hundred”. A rate of 20% is 20 for every 100, which is why you divide the rate by 100 before multiplying. Skipping that single step is the most common error, and it inflates the result a hundredfold.

A fourth formula follows from these for anyone who knows the discounted price and the rate and wants the original: divide by what is left of one after subtracting the rate. Four formulas answer every discount question there is, and no fifth one is needed.

The three core formulas are:

• Discount amount = original price × (discount rate ÷ 100).
• Price after discount = original price − discount amount.
• Discount rate = ((original price − price after discount) ÷ original price) × 100.

And to recover the original price when you know the discounted price and the rate: original price = price after discount ÷ (1 − discount rate ÷ 100).

How to calculate the price after a discount

Calculating the price after a discount takes two steps: work out the discount amount, then subtract it from the original price. There is no third step, and the size of the rate makes no difference.

The usual mistake is subtracting the rate straight from the price, taking 20 off 1,000 and landing on 980. A rate is not an amount; it is a share of an amount, and it has to be converted into currency before you subtract it.

For a quick check, break the rate into parts: 10% is a tenth of the price and 5% is half of that. So 35% of 1,000 is 300 plus 50, or 350, leaving 650. That estimate is fine in a shop, but an invoice needs the exact figure, carried at the precision your tax authority requires per line rather than on the total alone: two decimals under ZATCA, up to three under JoFotara.

Example: a product priced at 1,000 with a 20% discount.

• Discount amount = 1,000 × (20 ÷ 100) = 200.
• Price after discount = 1,000 − 200 = 800.

For the rates that come up most often, here is the result on a price of 1,000:

The quick shortcuts: divide by 10 for a 10% discount, divide by 5 for 20%, and halve it for 50%. For percentage work in general, use the percentage calculator.

How to find the discount rate from two prices

Finding the discount rate is the reverse operation: you know both prices and want the size of the real reduction. This is the situation you face in front of a sale tag showing an old price and a new one with no percentage stated.

Three steps: subtract the discounted price from the original to get the discount amount, divide that by the original price, then multiply by 100 to turn it into a percentage.

Watch the divisor. You always divide by the original price, never by the discounted one. Dividing by the wrong price inflates the rate and makes the offer look bigger than it is. This is also the only verification tool a buyer has, since plenty of sale tags quote a rounded rate or compute it against a price the item never actually sold at.

Example: an oven priced at 400 drops to 360.

• Discount amount = 400 − 360 = 40.
• Discount rate = (40 ÷ 400) × 100 = 10%.

This is how you check whether a sale tag is telling the truth: work out the real rate yourself instead of trusting the number on the label.

How to find the price before the discount

Recovering the price before a discount is useful when you can see the reduced price and the rate and need the original it was built on. Accountants need this more often than shoppers do, when checking a supplier invoice or verifying an advertised pre-sale price.

The rule: divide the discounted price by one minus the rate as a decimal. At 10% the divisor is 0.90; at 25% it is 0.75.

Do not add the rate back to the discounted price expecting to return to the original. Adding 10% to a price cut by 10% does not bring you back, because each percentage is calculated on a different base. The higher the rate, the wider that gap: at 50% the correct divisor is 0.50, which doubles the price, whereas adding 50% returns only three quarters of the original.

Example: the price after a 10% discount is 1,800.

• Original price = 1,800 ÷ (1 − 0.10) = 1,800 ÷ 0.90 = 2,000.

Note that you divide by 0.90, not 1.10: a discount lowers the price, it does not raise it. This step is useful when you are checking a supplier invoice or verifying an advertised pre-sale price.

Percent off: a quick reference table

“20 percent off” and “a 20% discount” are the same calculation written two ways. Shoppers tend to say the first and invoices say the second, but the arithmetic does not change: multiply by the rate over 100, then subtract.

What people usually want is the answer, not the method. “What is 20 percent off 50?” has no single answer until you name the price, because a rate is a share rather than an amount: 20 percent off 50 is 10, and off 900 it is 180.

The table below gives the amount you actually pay for the eight rates that come up most, against two common starting prices. If your own price is not listed, enter it in the calculator above and the result appears as you type, in whichever currency you happen to select.

Both columns show what is left to pay, not the discount itself. So 20 percent off 100 is a discount of 20 and a price of 80.

Discounts and sales tax on an e-invoice

Now that e-invoicing is mandatory in both Saudi Arabia and Jordan, handling discounts on an invoice has to be exact. Getting it wrong does not just cost you margin, it can expose you to tax penalties.

The order of the two steps is the whole issue. The discount comes off the original price first, and tax is then calculated on what remains, because tax is due on the consideration the customer actually paid rather than on a price they never paid.

Reversing that order changes the taxable base you declare, not just the invoice total. The applicable rate also depends on the country, which the calculator above handles automatically.

This covers a trade discount granted at the point of sale. A discount granted later is never handled by editing an invoice that has already been issued; it needs a separate correction document, and which document depends on your country’s rules.

The core rule: the discount applies to the original price before tax is calculated.

• Price after discount = original price − discount amount.
• Tax = price after discount × the rate that applies in your country.
• Total = price after discount + tax.

Saudi Arabia applies value-added tax at 15%, administered by the Zakat, Tax and Customs Authority (ZATCA). On a product priced at 1,000 with a 10% discount:

• Discount amount = 100.
• Price after discount = 900.
• VAT = 135 (15% of 900).
• Total = 1,035.

Jordan applies General Sales Tax at 16%, administered by the Income and Sales Tax Department (ISTD), with reduced rates on certain goods. The same 1,000 with a 10% discount gives a 900 net, 144 in tax, and a total of 1,044. The calculator above picks your currency automatically and lets you switch between six from the list. The tax option appears for the Saudi riyal and the Jordanian dinar, the two rates we can source, and disappears for the rest rather than applying a rate we cannot verify.

The common mistake is applying tax to the original price (1,000) and then subtracting the discount, which inflates the taxable base.

For Saudi VAT specifically, see how to calculate tax on an invoice.

The merchant’s view: never discount below your margin

A discount is a financial decision before it is a calculation. The most you can give away is the gap between your selling price and the item’s total cost. Below that, the offer becomes a loss.

Example: an item with a total cost of 208 (200 purchase price plus 8 covering its share of rent, labor and capital) sells for 228. The margin is 20, so the maximum possible discount is 20, or roughly 8.8% of the selling price. Anything larger means selling below cost.

So before you announce any offer, you need the real profit margin per item, not the margin across the whole store. Fast-moving categories such as fashion do reach 70% off at the end of a season, and that is only sensible when clearing the stock costs less than holding it. Do not confuse this trade discount with a cash discount, which rewards early payment rather than cutting the selling price.

Common mistakes when calculating a discount

Discount errors rarely show up in the arithmetic itself. They show up in the order of the steps, which produces an invoice that looks correct and is wrong underneath. That is more dangerous than an obvious error an accountant would catch immediately.

Two are the most expensive: calculating tax before the discount instead of after, and adding two consecutive discounts together as one rate. The first inflates the taxable base and exposes you to a penalty; the second gives the customer a smaller discount than you promised.

Most of them share one cause: treating a rate as though it were an amount. A rate means nothing apart from the price it is calculated on, and any error in identifying that price carries through to the result magnified. Checking the base before issuing the invoice catches most of these.

The six that recur most often, with the correct handling for each:

• Applying tax before the discount instead of after, which inflates the taxable base and the amount you collect.
• Adding two discounts together. 20% then 10% off the remainder is not 30%, it is 28% (1,000 becomes 800, then 720).
• Dividing by the wrong figure when recovering the original price: divide by (1 − the rate), not (1 + the rate).
• Discounting past the profit margin without checking the item’s cost.
• Discounting the list price rather than the actual one, which makes the real rate far smaller than advertised.
• Rounding at the wrong level or precision, which shows up as a mismatch in the total.

How Qoyod helps you manage discounts

The calculator solves the arithmetic once. Controlling discounts across a whole business is a different problem. There the question is not “how much is the discount” but “who may grant one, up to what limit, and how does it appear on the invoice and in the reports”.

Three things need an accounting system rather than a calculator: tax computed on the post-discount price on every invoice without manual intervention, discount authority capped per user, and the effect of discounts on revenue visible in a report rather than an estimate.

The practical difference is that a calculator gives you a number while a system gives you a control. A number is right once; a control is right on every invoice every user issues, without anyone on the team having to remember the rule.

With Qoyod you get:

• E-invoices that meet the requirements of the Zakat, Tax and Customs Authority (ZATCA), with tax calculated on the post-discount price.
• E-invoices issued through the national invoicing system (JoFotara), with tax calculated on the post-discount price.
• Discount permissions in point of sale (a separate product, purchased on its own): who may grant a discount, and the maximum rate they can apply.
• Sales reports that show what discounts are doing to your revenue.
• Time-limited offers and discounts in Q.Flavours for restaurants (a separate product).

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