How to calculate VAT? Prices excluding and including tax, examples of calculations

It is not always easy to calculate the VAT rate or to determine the amounts excluding and including tax related to it. Discover the main formulas to know.

Value Added Tax (VAT) varies by product or service. The normal rate of 20% applies to the majority of goods and services. Unprocessed agricultural products are subject to an intermediate rate of 10%. The reduced rate of 5.5% applies to food, hygiene products, gas and electricity in particular. Only medicines reimbursed by Social Security are subject to the super reduced rate of 2.1%. How to quickly calculate the VAT, the price excluding or including VAT? Explanations.

What is VAT?

VAT is an indirect tax included in the sale price of goods or services paid by consumers. How it works is relatively simple:when a business charges for a good or service, the price includes VAT. This results in a price excluding tax (HT) and a price including all taxes (TTC). The consumer therefore pays the price including VAT while the company records the amount excluding VAT and transfers the amount of VAT to a special account.

Calculate VAT from a price excluding VAT

To obtain a price including tax from the amount excluding tax, multiply the latter by:

• 1.2 where the applicable VAT rate is 20%;
• 1.1 where the applicable VAT rate is 10%;
• 1.055 when the applicable VAT rate is 5.5%.

The amount of VAT can be obtained by deducting the amount excluding VAT from the amount including VAT.

Let’s take the example of a product sold at the price excluding tax of 1,000 euros with 20% VAT. The price including tax is obtained by doing the following calculation:1,000 X 1.2 =1,200 euros. The amount of VAT is therefore 200 euros.

Calculate VAT from a price including VAT

To obtain a price excluding VAT from an amount including all taxes, divide the latter by:

• 1.2 if the applicable VAT rate is 20%;
• 1.1 if the applicable VAT rate is 10%;
• 1.055 if the applicable VAT rate is 5.5%.

The amount of VAT can be obtained by deducting the amount excluding VAT from the amount including VAT.

For a product sold for 2,500 euros, with 10% VAT, the amount excluding VAT can be determined by doing the following calculation:2,500/1.1 =2,272.72. The amount of VAT is equal to 227.28 euros.

The VAT return

Companies subject to VAT must file a VAT declaration online on the website https://cfspro.impots.gouv.fr. They can choose to send it annually, quarterly or monthly, depending on the turnover achieved and the tax regime chosen.