How To Calculate VAT?
How To Calculate VAT is one of the most asked questions when preparing tax invoices, quotations or proforma invoices. To Calculate VAT, you need to: 1) know the applicable VAT Rate of your country (For example, the Standard VAT rate in South Africa is 15%), 2) Know the quantity of the goods or services you want to provide to your client (Total Unit) And 3) Know the amount that you want to charge clients. (VAT is referred to as GST in some countries). You would also need to determine whether the amount you want to charge clients already includes VAT or does not have VAT included. The calculations would vary slightly depending on whether the amount you desire to charge clients is inclusive or exclusive of VAT. We break it down further below.
how to calculate vat inclusive?
When an amount is VAT inclusive, it means that VAT has already been taken into account and is included in the amount already (That means, the amount you want to charge a client or a supplier wants to charge you already has VAT inside). Given that some country laws require the amount that excludes VAT, the amount that includes VAT and the VAT amount to be specified separately in a tax invoice, it is important that we are able to extract the VAT amount from the amount inclusive of VAT. For example, if the price you want to charge a client is R5000 and VAT is already included in the R5000 (VAT inclusive) and assuming the VAT rate is 15%, then the VAT amount is calculated as R5000 x (15/115) = R652.17. The amount excluding VAT would be R5000 x (100/115) = R4347.83 OR simply R5000 Minus R652.17
how to calculate vat Exclusive?
When an amount is VAT exclusive, it means that VAT has not been accounted for and is not included in the amount. You would need to calculate the VAT amount using the applicable VAT rate and add it to the amount exclusive of VAT to come up with the total amount to charge the client. For example, if the price of R5000 is VAT exclusive and assuming the VAT rate is 15%, then the VAT amount is calculated as R5000 x (15/100) = R750 OR Simply 5000 x 15% = R750. The amount including VAT would be R5000 x ([100 +15]/100) = R5750 OR simply R5000 + R750 = R5750 OR R5000 x 1.15 = R5750
Now that we have elaborated on How to Calculate VAT manually, our team at Tenderkom has built a simplified calculator which you can use a business person when when preparing tax invoices, quotations, or proforma invoices. We have made it easy to answer the question of how to calculate Vat using the following advanced Vat Calculator below:
Note that in South Africa, VAT is charged only on taxable supplies and zero-rated supplies. There are 3 types of supplies in South Africa, namely, Standard Rated supply ( VAT is charged at 15%), Zero Rated Supply (VAT is charged at 0% e.g Export), Exempt Supplies ( No VAT is charged e.g Residential Accommodation). If you which to know more about the intricacies and technicalities of VAT within the South African Landscape to improve your knowledge on how to calculate VAT or prepare VAT schedules contact us for a corporate training.