Calculating VAT exclusion using gross amounts is as follows: divide the gross amount by 1 and the VAT percentage (for example, 15% should be divided by 1.15), subtract the gross amount, multiply by -1, and round up to the nearest value (including euro cents).
An item or service is taxed based on its value added (VAT). Our first task is to figure out how to calculate a percentage.
Percentages can be thought of as a combination of “per” and “cent”. “Percent” refers to “per hundred” because “cent” stands for “century” (think of a hundred in cricket or years).
Also, read How to Calculate VAT Exclusive?
A typical R100 purchase is subject to a 15% VAT rate – 15 per hundred. A product that costs R100 without VAT just needs to be increased by R15 to come to R115 including VAT.
A percentage “of” the purchase price can be used to calculate VAT payable for any amount. Multiplying is the meaning of “of” in math.
The VAT (15%) on something costing R25 is calculated by multiplying it by 15%. Using 15% as our example, we multiply R25 by 15/100. As follows:
The total cost including VAT is R28.75, which is R25 plus R3.75. It’s that simple.
Here’s a shortcut to calculating VAT based on what you now know about math. Multiply the price of an item by 1.15 to get the total cost including VAT. What is the significance of 1.15? In this case, 15/100 equals 0.15, which should be added to the price (1.00).
Based on the previous example, R25 x 1.15 = R28.75 would be the total cost including VAT.
Also, read What is the VAT Flat Rate Scheme?
Knowing how to calculate the final cost of an item after VAT is useful, as you won’t have to wonder what it will cost. Furthermore, you will be able to compare two products like for like. Investing fees, for instance, are quoted without VAT. The total cost of option 1, which charges 1.00% excluding VAT and 1.1% including VAT, is 1.15% if you have two identical investment options, with option 1 charging 1.00% excluding VAT and option 2 charging 1.1% including VAT.
Here, 1.00 represents 100% of the price, don’t you think?
Also, read VAT Inclusive Meaning