VAT, or value added tax, is an indirect tax by a government on nearly all products and services that you pay for. The rate of VAT depends on each individual country, and it can also vary depending on the product or service you are paying for. Some products have a 0 per cent VAT rate, while others have a higher rate. Check with the local or national tax office to find out what the VAT rate is in the country where you live or visit to be able to calculate the VAT on a calculator.
Determine whether the price of a product includes the VAT or not. The calculation may differ depending on calculating VAT-exclusive (price excluding VAT) or VAT-inclusive rates (price including VAT).
Enter the price you want to calculate the VAT on into the calculator. For example, if the value of a product is £78 and the VAT is set at 20 per cent, then you have to find out how much is 20 per cent of £78 and add it to £78 to get the value-added, tax-inclusive price of a product.
Enter 120 into a calculator. Multiply it by .2 and add the result, which is 24, to 120 to get the value-added rate, which would be 144, or £93.
Calculate the VAT-exclusive price of a product by dividing the VAT-inclusive price by 1.2 if the VAT is set at 20 per cent. If the VAT is set at 10 per cent, 15 per cent, 25 per cent and so on, divide the VAT-inclusive price by 1.1, 1.15, 1.25 and so on. The easiest way to do it is by writing the VAT rate after the 1 digit.
Enter 120 into the calculator. Divide 120 by 1.2 if the rate of VAT is 20 per cent in the country where you live. You will get 100 which is the product price excluding VAT. The difference, 20, is the VAT.
Check the receipt you get after your purchase if you are unsure how to calculate VAT. In every country where governments impose VAT, the receipt must include a detailed list breaking down the full price of a product into the "core price" and the VAT on it.
Tips and warnings
- Check the receipt you get after your purchase if you are unsure how to calculate VAT. In every country where governments impose VAT, the receipt must include a detailed list breaking down the full price of a product into the "core price" and the VAT on it.