An Add VAT Calculator helps you calculate the total amount of a price after adding Value Added Tax (VAT).
The inclusive VAT means that the price of a product or service already includes the value of the tax. Most companies have the inclusive VAT displayed on the price of goods and services.
Inclusive VAT is significant as it helps you determine the real effect of the VAT tax on your financial statements and gives you an accurate representation of the revenue generated monthly and annually, exclusive of the VAT amount. Understanding the difference between inclusive and exclusive VAT is essential for accurate financial planning and compliance.
What is Inclusive VAT?
In SA, the VAT is charged at 15%, which means you would have to find the VAT amount to include in the pre-VAT amount. For this, you just have to multiply it by 0.15% and the answer to this calculation gives you the VAT-inclusive amount. Please note that the VAT-inclusive amount is always more than the VAT-exclusive amount.
Key Elements of VAT Inclusion
- The customer pays a flat rate for the product or goods.
- Calculations of the VAT are done prior to the transaction.
- The unit price is lower before the tax is applied.
How to Calculate Inclusive VAT?
You can do these simple calculations to figure out the inclusive VAT of your company’s bought products and services. So, dive right in.
The formula for inclusive VAT is Gross = Amount / 100 x (100 + VAT Rate).
Now, let me break it down for you.
- First, decide what the VAT rate is for your calculation. In this case, the current standard VAT rate in South Africa is 15%.
- Now, divide the product’s amount by 100.
- Once done, multiply the obtained amount by (100 + VAT rate). By converting this into a calculation, you will get the amount/ 100 x (100 + 15). The obtained amount is your gross amount including the VAT.
- Now that you have the gross amount, you can also calculate VAT from it through a simple formula, Total VAT = Gross – Price.
Let me demonstrate how to calculate inclusive VAT through a real example. Suppose you are selling a product for R500. Here are some simple calculations to derive the VAT from gross.
- Amount = R500
- VAT Rate = 15%
- As given by the formula, Gross = Amount / 100 x (100 + VAT Rate).
- Now, let’s enter the values in the formula.
- First, by dividing the amount by 100, we will get R500/ 100, which is around 5.
- Next, multiply it by (100 + VAT Rate), which is 5 x (100 + 15), which is around R575.
- Hence, the gross amount or inclusive VAT of this product would be R575.
Now, you can easily obtain the total VAT from the gross amount.
- Total VAT = Gross Amount – Amount.
- Total VAT = R575 – R500.
- The total VAT in this case is R75.
How do you calculate the VAT-inclusive price of a product using the VAT Calculator?
To calculate the VAT-inclusive price of a product, all you need to do is multiply the price of the product by 1.15. For instance, if you bought a product at R75, its VAT-inclusive amount would be R75 x 1.15 = R86.25.
What are the standard and reduced VAT rates in South Africa?
The standard VAT rate for most goods and services in South Africa is 15%. And, there is no reduced rate according to the South African VAT regime.