How to Calculate Reverse VAT

Written by c. taylor
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VAT, or value added tax, is a sales tax system widely used throughout the world. VAT is normally added by the retailer to the purchase price when a sale is made, or it is already included in the list price. The consumer pays the VAT, but it is the responsibility of the retailer to collect and submit the tax to the government. Reverse VAT shifts the responsibility to the purchaser, who has to calculate and submit VAT themselves. In most cases, reverse VAT applies to businesses, such as importers or investors, rather than private consumers.

Skill level:
Moderately Easy

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Instructions

  1. 1

    Determine the applicable VAT rate. This information should be available through the government website of your respective country. Some product categories have reduced VAT, so look up the rate specific to the products in question.

  2. 2

    Convert the VAT rate into decimal format. This is done by dividing the percentage by 100. To use the U.K. as an example, its VAT is 17.5 per cent. Divide 17.5 by 100, which would result in .175.

  3. 3

    Multiply the purchase price by the VAT decimal. If the product totalled 1000 GBP, you would multiply that by .175, which equals 175 GBP.

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