VAT Calculator

This calculator will automatically calculate the VAT for you.

You simply need to enter the value into the respective rows put in the VAT percentage and you will have the total.

VAT CALCULATOR

 

Excluding VAT:

When entering the values in the EXCLUDING VAT calculator the “Total” will be the price of the product without Tax.

If you wish to calculate excluding VAT the formula is

For example if we take the standard rate of UK which is 20% and apply it on a product worth £300 excluding the tax, The original price of the product is £250 and the Taxon it is £50 making the total £300.

Adding VAT:

When entering the values in the ADDING VAT calculator the “Total” will the value of Tax or the amount of Tax needed to be added to the original price.

If you wish to calculate adding VAT the formula is .

For example if we take the standard VAT of UK which is 20% and apply it on a product worth £300 adding VAT to the original price of the product will make it cost £360 where £60 is the value of the VAT.

 

 

What is VAT ?

What is VAT

Text book definition:

A value added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of a supply chain, from production to the point of sale.

In simple terms:

VAT is a tax that put on the product at each stage of production. It is a certain percentage that each company/brand involved in the chain of production has to pay to the government.

Countries that use VAT:

VAT is used by more than 160 countries but is slowly being replaced in some with the good and services tax or GST for short.

What is VAT based on?

Instead of most tax that is based on ones income VAT is solely based on user consumption.

Example:

Let’s say there is a candy company, they make a candy with $2 worth of materials the company selling the materials, from where they are buying, sells it at $2.20 where the 20 cents is the VAT. The candy company manufactures a candy for $5.40 where 20 cents is the VAT and 20 cents is to make up for the VAT they paid when buying the materials. Then a retailer sells the candy at $7.60 where 20 cents is the VAT and 40 cents is to make up for the VAT paid by the company.

From the example if you don’t understand then in simple terms at each stage of purchase a fixed amount is the VAT the upper amount is to make up for the VAT paid by the preceding entity in the chain of production.

Important points to remember:

  • A VAT is added at every point of production in the supply chain.
  • VAT is a fixed amount paid by everyone it isn’t hinder by wealth.
  • VAT is slowly being replaced with a tax known as GST which is a combination of multiple taxes including VAT.

 

What is the standard rate of VAT?

In the European Union the VAT is 20% on most goods and services but is reduced to 5% for certain goods and services such as products related to children and home energy and is 0% for most food and children clothing.

VAT rates differ country to country but are a fixed amount. Some countries reduce overall VAT while some reduce VAT on certain supply lines so if you want to know more about the VAT of a country make sure you do proper research on it.

Difference between a VAT and sale tax:

Arguably VAT and sales tax can create the same amount of revenue the difference lies at the point money is paid.

When it comes to sales tax the government receives a tax on sale for example on $1 sale the government will receive a 10 cents tax, but when it comes to VAT each entity on the supply chain will pay a tax such as a materials company will pay 3 cents in VAT a production company 4 cents in VAT and a retail company 3 cents in VAT in the entire production line a total of 10 cents of VAT is paid.

The difference is that the amount is same but the way the amount is met is different where sales tax are applied on one point or the end point of production chain i.e. the sales point the VAT is applied at all stages of production from materials to sales.

GST

In some countries VAT is replaced with GST which is known as “Goods and Services Tax” the terms are interchangeable even they can differ tremendously in their respective countries.