How to Calculate VAT

by Kevin
(Pretoria, South Africa)


how to calculate VAT

Question:

How do I calculate the VAT included in the debtor and creditor control accounts?


Answer:

Control accounts for debtors and creditors are the totals charged to a customer. They are the full amounts of the sale including VAT (Value-Added Tax) that are owed from one party to another.

In other words, they are always VAT inclusive, meaning that the figure is the total of the actual sales price plus VAT.

It's important to understand that the VAT percentage is always based on the actual sales value of the product or service - before adding VAT. So for example, if the VAT rate is 14%, that's 14/100 of the actual sales figure.

Since the sales figure is the basis of our calculation (the basis of calculating the VAT portion), we always assign this a mathematical value of 100% when doing these calculations.

In mathematical terms, the total for debtors or creditors equals: 100% + 14% = 114%.

Calculating the VAT Portion from the Debtors / Creditors Total (VAT Inclusive Figure)

If you want to calculate the VAT portion and you only have the total of debtors or creditors, you take this last figure and multiply it by 14/114.

So, for example, if our total debtors amount owing to the business is R228 (R = rands = South African currency), then we do the following:

VAT Portion = Total Debtors x 14/114
= R228 x 14/114
= R28

Calculating the Actual Sales Figure (VAT Exclusive) from the Debtors / Creditors Total (VAT Inclusive)

The actual sales figure here (excluding VAT) could be calculated in 2 ways:

1) If we have the VAT figure already, we could just take the total of the debtors, which includes VAT, and subtract the VAT figure:

R228 - R28
= R200

2) If we don't have the VAT figure, but we have the VAT rate, we could take the total debtors figure and multiply this by 100/114:

R228 x 100/114
= R200


Hope that helps and that you now have a better understanding of how to calculate VAT!

If you want more examples of how to calculate VAT or how to calculate any of the other figures like the sales figure or the debtors or creditors total, then check out the comments section below, which has a whole bunch more questions and answers.

Best,
Michael Celender
Founder of Accounting Basics for Students


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Comments for How to Calculate VAT

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Calculate VAT Excluding
by: Anonymous

How should I calculate VAT Ex.? Is it from the price quote or sub total?

Price quote = 8190.00
Mark up 4.5% = 368.55

Sub total = 8,558.55
VAT ON A SALE
by: Anonymous

I am in the travel industry and my VAT is not straightforward.

On a sale, I made of R55 300.
Cost price R49 149 (vat R5 127)
My profit is R6 151

I am Vat registered.

Do I charge my clients Vat on R55 300?
Or do I charge the Vat on the Profit I made R6 151?

You always charge clients VAT on the sales price, not on the profit you end up with.

You can claim VAT input from the government on your cost price or expenses.

The difference between Vat Output based on sales and VAT Input based on cost, gives you a total you would owe to the government.

Hope that makes sense!

- MC (founder/editor)
How to Add VAT to Selling Price (Mark-Up)
by: Anonymous

I purchased a product for resale. Unit price from supplier is R100. Inclusive of VAT is R115 (15%). R15 input VAT paid.

1) When I add my markup do I add it to the R100 unit price or to R115?

2) And then do I charge output VAT on R100 + markup or R115 + markup?

1) When calculating the final selling price (including VAT) you can add your mark-up percentage in either of those ways.

Your mark-up is typically on the cost price (excluding VAT). So for example if you marked up your product by 20%, you would sell it at R120 + VAT. This is calculated as R100 x 1.20 = R120.

The full selling price you would charge would be R138 (R100 x 1.20 x 1.15). This is actually the same as R115 x 1.20 (the 20% mark-up percentage). So you can mark it up either way, based on the R100 or based on the R115 - as long as the 15% VAT is still included in the final selling price.

2) You charge output VAT on the final selling price - it's included in the final selling price. So if the final price is R138, your output VAT is 15/115 x R138 = R18. That's the same as R138 - R120.

Hope that helps!

Best,
Michael C.
Accounting Basics for Students
Calculating Total Excluding VAT
by: Anonymous

If the vat amount is known how do I calculate the amount {exclusive)?

Assuming VAT of 15%:

Total excl. VAT = VAT figure x 100/15

Best,
Michael C.
Founder of Accounting-basics-for-students.com
VAT Inclusive Calculation Question
by: Anonymous

What is the amount of VAT if the cost of the suit is R85,500 (VAT inclusive)?

R85,500 x 14/114
= R10,500

That's assuming a VAT rate of 14%.

If it's 15% or some other number, it's x 15/115. Etc.

Best,
Michael C.
Founder of Accounting Basics for Students
Calculate selling price and the VAT
by: Anonymous

An item with a selling price of R234.50 ex VAT , was sold. Calculate both the full selling price and the VAT portion of the sale?

Appreciate your assistance.

Let's assume VAT = 10%

Start with the VAT portion, that's the simplest:
= R234.50 x 10/100
= R23.45

Now the full VAT-inclusive selling price:
= R234.50 + R23.45
= R257.95

Hope that helps!

- Michael Celender
Finance Manager - Calculate Revenue from VAT Output
by: Tso Kg

Please assist I have vat output of R630,902.10 I need to determine the revenue.

A: Let's say the VAT rate = 15%

VAT Output = Revenue x VAT rate

VAT Output = Revenue x 15%

So switch things around in the formula and we get:

Revenue = VAT Output / 15%

Revenue = VAT Output / 0.15

Revenue = R630,902.10 / 0.15

= R4,206,014

Hope that makes sense.

- Michael Celender
inclusive and exclusive tax
by: arun from india

What do you mean by inclusive tax and exclusive tax? Can someone please give me a brief example of my question. THANK YOU

Inclusive tax is referring to an amount that includes the VAT.

For example, debtors or creditors. Or the full cash paid for a purchase (including VAT). Or the full cash received for a sales (including VAT).

Exclusive of tax refers to the actual sales figure or purchases figure - which excludes VAT.

For example, Joe sells goods for $110 including VAT.

He receives $110 in cash. This is the inclusive amount - includes VAT in it.

The actual sales figure will exclude VAT. In this case it will be $100.

The VAT is $10. It's at a rate of 10% in this example ($10/$100 sales value).

FYI usually they will give you the VAT rate in the question. You just have to calculate either the exclusive or inclusive figure.

Hope that helps!

- Michael
Vat
by: Anonymous

Good Day,

I charged a vat inclusive hourly rate of R550/hr for consulting fees which totaled R88,000 for the month (inclusive). What amount do I use as my basic salary for my payslip, R88,000 or R88,000 excluding vat (R77,192)?

Your business will have to pay VAT over to the tax authorities so this VAT amount doesn't really belong to you as a salaried employee. The business should just be collecting it and then paying it over.

The VAT amount should therefore not be included in your salary (the money paid to you). So I would use the excluding vat figure of R77,192 as the salary figure for your payslip.

Hope that helps.

- Michael
VAT
by: Anonymous

Monde sold a pair of shoes for R547,20, inclusive of VAT at 14%. if his mark-up percentage as a percentage of cost is 25%, what is the cost price of the product?
Gross profit earned
by: Anonymous

Hi,

If I'm given an exclusive cost price per unit of R2,104, and the inclusive price is R2,398.56, and the markup percentage is 60%, do I calculate the gross profit earned with or without VAT?

I know how to do the calculation, I'm just not sure if gross profit includes or excludes VAT.

Also, how is a gross margin percentage calculated with the figures given above?

Thank you in advance!

Gross profit is made up of Sales and Cost of Sales.

And Cost of Sales = Opening Inventory + Purchases - Closing Inventory

All these things I just mentioned above - every single one of them excludes VAT.

So short answer - gross profit always excludes VAT.

You need to calculate gross profit without VAT.

On your 2nd question, I'm not 100% sure about gross margin percentage but I think it's as follows:

Calculate the sales price first:
= Cost Price + 60% mark-up
= R2,104 + (R2,104 x 60%)
=R3,366.40

Gross margin percentage:
= (Difference between the Sales figure and the Cost) / Sales Figure
= (3,366.40 - R2,104) / R3,366.40
= 0.375
= 37.5%

That last one about calculating gross margin percentage is a tough one!

Hope that helps!

- Michael Celender
Accounting Basics for Students
Great help God bless you
by: NUKhan

Regarding VAT it is a real refresher.
Thanks for sharing.

Welcome!
Calculating VAT
by: Anonymous

What is the reason for adding the 10% to the actual value of goods when calculating VAT?

Because the 10% IS the VAT.

The 10% IS the rate of Value Added Tax.

The actual value of goods (inventory, purchases, any assets) always excludes VAT.

You add VAT because the business has to charge VAT on its sales. The full amount collected in cash is the value of the goods PLUS the VAT added to this.

Hope that makes sense!

- Michael
Rep. of South Africa VAT
by: Anonymous

For services rendered on an invoice to a client what would the VAT amount be on R1960 (Rands-South African currency) of 14%?

If R1,960 is the full amount on the invoice, then this is the figure INcluding VAT.

So you do this:
R1,960 x 14/114
= R241

Make sense?

- Michael
Help
by: Anonymous

If I have the item price and selling price how do I work out the percentage?
VAT Calculation in very Simple Way
by: Chris

To put it is a very simple way.

Item price: 4,954
VAT: 14%

To get the total amount all you have to do is:

Convert the percentage rate to a decimal number

- 14 divided by 100 = 0.14 (or simply move the decimal point 2 places from right to left)

Then

- Multiply the item price by the VAT decimal amount (4,954 X 0.14 = 693.56)

693.56 is 14% of 4954

Then

- Add the item price and the VAT amount (4954 + 693.56 = 5647.56

5647.56 is the total cost of the item including the VAT


____________________________________________

The key here is to know how to convert the percentage rate to a decimal number which is very simple (you just need to move the decimal point 2 places from right to left)

That means: 23% is 0.23
2% is 0.02
10% is 0.1
1% is 0.01
38% is 0.38

As simple as that!


Great comment Chris! Thank you!
Inclusive and Exclusive
by: Boitumelo

Hey guys I have some few questions on till slip
The total item R498.93.
1) Calculate the amount payable including 14% vat
2) What is the total amount exclusive jurisdiction of Vat
VAT Including or Excluding
by: Anonymous

How do I know when to use 14/114 if VAT is 14 percent?

Use the 114 figure when you're starting from the inclusive figure (cash received, debtors amount, creditors amount, etc.).

- Michael
confussed
by: Anonymous

You say assuming vat is 14% what do you mean by assuming. The fact is vat is 14%.

VAT rates change sometimes. Also VAT exists in different countries, not just in one country. Some countries have something similar and call it a sales tax. In South Africa VAT is 14% (I think) but it's different rates in other countries that have VAT or a sales tax.

Best,
Michael Celender
VAT only
by: Anonymous

Hi

If I only have the VAT amount eggs R1356.52, how do I calculate the exclusive and inclusive amounts. 10% is easy as you only move the dot, and 5% will always be half of any 10%.

Tx

10% is actually not always so easy but definitely easier to calculate than say 14%. I'm assuming 10% is the rate and that R1356.52 is just the VAT on the eggs, I hope I understood that right.

Exclusive amount is 100/10 X R1356.52.

The full inclusive amount is 110/10 X R1356.52.

- Michael Celender
VAT Rate
by: Anonymous

If I purchase a pen, excluding VAT (at a rate of 14%), is R75. Then the VAT is...

Then the VAT is R75 x 0.14 = R10.50

- Michael Celender
VAT Question
by: Anonymous

The advocate charged R975 VAT exclusive but here I get R1,111.50 VAT inclusive. Now my question is how did we get that R1,111.50 answer?

VAT is based on the R975. If VAT is 14% then it's 14/100 of the R975. We can calculate VAT by saying 14/100 X R975 = R136.50. R975 + R136.50 = R1,111.50.

Or an even quicker way of solving this is to simply say: 114/100 X R975 = R1,111.50

Hope that helps!

Best,
Michael Celender
Question
by: Anonymous

If my VAT rate is 14% and I have purchase price of 48,000 as my Net Price, I understand my Gross price will be 54,720 (48,000 X 1.14 = 48,000). On my study guide there is 6,720. How was this 6,720 derived?

Net purchase price 45,000 + 3,000 = 48,000
add VAT at 14 % (then it says) 6,720

Total purchase price = 54,720

I believe the 6,720 was derived from 48,000 X 14%.

Best,
Michael Celender
Calculate VAT
by: kuhle

the total is 318.59
Excluding VAT
by: Anonymous

Hi I would like to know how much would I have to cough out if I want to buy a device that cost 1750 excluding, and how much is it when vat included?

You do 1,750 x (100+VAT rate)/100.

E.g. the VAT rate is 15% so you do 1750 x (100+15)/100 = 2,012.50

- Michael Celender
Vat
by: PG

Which is the correct way to do vat is it

times 14
divide 100
OR
times 14
divide 114
VAT CALCULATION
by: Anonymous

total amount is rs 468.00 it is including vat. but my question is that 468 x 13.5% is not equal to 468 x 1.135 how it calculate.
How to Add On VAT
by: Rozzi

add 14% vat to your net amount
7500. x 1.14 = 8 550.00 gross amount/incl

check
gross amount less net amount = vat 14%
8 550. - 7 500. = 1 050. vat amount

or
you have the vat amount and need to find net amount

100/14 x 1 050. = 7 500.net amount/excl

or
you have gross amount
8 550. / 1.14 = 7 500. net amount/excl
Work out the purchase or sale amount using the VAT amount
by: Edward

To work out the VAT backwards, say you know how much the VAT was, but you don't know what the sale or purchase amount is, you do this:

Say the VAT amount paid was R5,000.00
Take R5,000.00 and times it by 114, then divide it by 14.

So R5,000.00 x 114 ÷ 14 = R40,714.28

Which means the amount you paid for it was R40,714.28
Calculating VAT Backwards
by: Michael Celender

The total you pay is always the 114 part of the equation I mentioned above. In other words, it is the 100% paid for the product plus the additional 14% VAT added together.

When we go backwards from the total paid to find the VAT we do the following:

14/114 X Total Paid
=14/114 X R72,514.34
=R8,905.27
How Do I Calculate VAT Backwards
by: Bev

How do I calculate backwards...what's the VAT I paid on total of R72,514.34?
If only VAT amount is known
by: Anonymous

How do I calculate the inclusive/exclusive price if only the VAT amount is known? E.g. I know I was charged 50 VAT, what is the VAT inclusive price? And VAT exclusive price?
VAT on 7500
by: Michael Celender

If the R7,500 is the full price of the product or service, you get the VAT like this:
R7,500 X 14/114 = R921

If the R7,500 is the price before adding VAT, then you work it out as follows:
R7,500 X 14/100 = R1,050

In the last option above, the total price of the product or service including VAT comes to R8,550 (R7,500 + R1,050)
VAT manually
by: Anonymous

Hi all, need assistance. How do I step by step work out vat manually on paper? Going for an interview and I need a crash course.
vat calculating
by: Anonymous

like 7500, how do I put a vat n get a correct answer.

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