Updated on May 14, 2022
How To Calculate VAT
For both situations where you need to add VAT to a price and when you need to remove VAT from a price, this simple instruction will explain how to calculate VAT.
In order to work with VAT, you must first realise that it is expressed as a percentage, hence you must use percentages in your calculations.
The term “percent” can be broken down into its two parts, “percentage” and “percentage”. Next, think of “cent” as being short for “century” (as in a hundred years, or when a batter gets a hundred runs in cricket), and then the word % becomes obvious and a lot easier to deal with:
Per one hundred, a percentage is 100 percent.
As we saw earlier, “15 per 100” is the current VAT rate in South Africa. To put it simply, you will pay R15 in VAT for every 100 rand you spend.
Per is a dividing unit in mathematics.
Because 15% is 15% divided by 100, we can also write 15% as 15% divided by 100 – which is the same as 15% divided by 100.
To determine how much VAT to add or subtract from a price to find the VAT included amount, and how much VAT to subtract from a price to obtain the price excluding VAT, we can use the 15% VAT rate.
Calculating the VAT Amount
It’s helpful to keep in mind that VAT is paid as a percentage “of” the purchase price when figuring out how much to charge.
The mathematical term for “multiply” is “of.”
To figure out how much VAT will be added to a purchase, simply multiply the total cost by the applicable VAT %.
The purchasing price of x is multiplied by 15 percent.
However, keep in mind that 15% represents 15 out of 100, or 15/100.
As a result, multiplying x by 15/100 equals the VAT on x, which is equal to (x)(15/100).
We can use an R50 item as an example to demonstrate how we can calculate the applicable VAT by multiplying R50 by 15%. As a result, we can calculate the VAT amount as follows:
This means that a purchase price of R50 entitles the buyer to pay R7 in VAT.
Calculating A Price Including VAT
In order to get the entire cost of a product, including VAT, you must first calculate the VAT amount and then add it to the original value.
To get the total (before taxes): Original Amount + VAT Amount
In the previous part, you learned how to determine the VAT amount by multiplying the original value by 15% (15/100).
For example, the VAT payable is R7 on a product that costs R50 without VAT.
Including VAT, the total cost would be:
In order to arrive at the total, add the original cost and the VAT.
+ 7 to R50
Top tip– To jump straight from an amount excluding VAT to an amount including VAT of 15%, multiply the original amount by 1.15
Total (Including VAT) = (Original Amount) x (1.15)
(Why 1.15? – Well VAT is 15% (15/100 = 0.15) and so to get to the total including VAT you need to add 0.15 to the original price (1.00) which gives 1.15)
Calculate A Price Excluding VAT
The VAT amount that was added to arrive at the price that includes VAT is what you need to calculate if you want to know what the price would be excluding VAT.
In this case, it’s a little more complicated than the VAT computation.
To begin, we can see that a VAT of 15% has been added to the original price. 15 percent equals (15/100 = 0.15), and we saw in the last section how to convert between VAT-exempt and tax-inclusive amounts by multiplying each by 1.15.
So, in order to go from a sum that contains VAT to an amount that does not include VAT, we must divide by 1.15.
To get the total (before taxes) you divide the total by 1.15.
Suppose we wanted to know what the value would be without VAT if we had a total of R57, which included VAT:
Including VAT, the total is calculated as follows: Total / 1.15
= R57 divided by 1.15
After subtracting the Total minus VAT from the Total including VAT, the amount of VAT that was included in the price may be found.
Including VAT, total = total minus total (excluding VAT)
From the above example,
Excluding VAT, totals are calculated as follows: total (Excluding VAT)
In other words, the answer is:
This is equivalent to R7
Our Online VAT Calculator is a great option if you don’t have the time or inclination to make your own VAT calculations.