VAT is, for many, a big headache. Whether you are self-employed or a person in the general scheme, whether you work or not, VAT is part of your life and knowing how to calculate VAT is something important.
Therefore, today we want to talk to you about this tax that has so little sympathy. However, calculating VAT can help you buy wisely or not be fooled. Are you ready to learn more?
What is VAT
VAT is actually the Value Added Tax. However, it is commonly known as VAT, and it is an indirect tax that applies to both consumer goods and services that are performed, either by a company or by another person.
Why is it considered an indirect tax? Because in reality it will depend on the type of product that is purchased. For example, a staple good, such as milk, cheese, or potatoes is not the same; than the PS5 console, which is now so fashionable.
The VAT must be paid practically always, whether you buy or if you are self-employed and / or present an invoice since that amount of VAT that you receive must be paid in the Treasury. But, do you know that there are several types of VAT? Currently, the VAT in Spain is 21% (although there are rumors that they will raise it to 23%). However, depending on the products, there is another type of VAT.
VAT rates
Focusing on VAT rates, today you can find three different types of VAT that are the following:
21% VAT
This is the general VAT, the common of almost all products and services, Except for the cases that we will see below. For example, if you buy a product that is not essential, then the VAT that is applied to you is 21% (consoles, video games, furniture ...).
10% VAT
This VAT is considered reduced, and it does not affect many products and services, but you will find it, for example, in passenger transport (train, bus ...), in hotels, shows, etc.
4% VAT
The so-called "super-reduced". And is not for less. It is the one you find in the first need products, that is to say, in food, books, non-advertising reviews, medicines… In short, everything that is necessary for day-to-day life.
There are also products and services exempt from VAT
In addition to the VAT rates that you have seen, you should bear in mind that there are some cases in which VAT is not charged (or paid). For example, in educational, social, cultural, sports activities ...; in real estate, insurance or financial operations; or in medical operations.
How to calculate VAT
But let's move on to what really interests you: Calculate VAT. As you have seen before The first thing you should know is if your service or product is included in one type of VAT or another, that is, if it is super-reduced, if it is reduced or if it is the general one. Or, hopefully, if it is VAT exempt.
Once you know it, you must do the calculation. For example, imagine that your service costs 100 euros + VAT. That means that you must collect your 100 euros and also the part that corresponds to VAT. Now, imagine that this VAT is the general, that is, 21%.
So on an invoice it should look like this:
Total: 100 euros + 21% VAT.
How much is 21 & 100 euros? They are 21 euros, which is what you support from VAT. In short, your total would be: 100 euros + 21 euros (VAT) = 121 euros.
Whether you have an eCommerce, a physical store, a professional service ... you have to include VAT. Some stores, to attract attention with their low prices, what they do is place these without VAT, and they advise but with small print.
Thus, when you start to buy and then add the VAT, you realize that it really is not as cheap as you thought at first. So be careful in case it happens to you.
The formula to calculate VAT in Spain
To make it easier, here we leave you the formula to calculate the VAT of the products or services depending on the type that you must apply.
Calculate VAT at 4%
If it is a super-reduced VAT, the formula is as follows:
Price without VAT x 1,04.
But it is possible that what you want to know how much is the 4% VAT, that is, the corresponding figure.
For that, you can use this:
VAT (4%) = (Product / service price x 4) / 100
Or what is the same:
VAT (4%) = Product / service price x 0,04
Calculate VAT at 10%
If it is a reduced VAT, the formula is:
Price without VAT x 1,10.
Now if you want know what is the VAT that corresponds to you, then you would have to first find out the corresponding VAT figure, that is:
VAT (10%) = (Product / service price x 10) / 100
Or what is the same:
VAT (10%) = Product / service price x 0,10
And therefore, the final result would be:
Total = Product price without VAT + VAT (calculated before)
Calculate VAT at 21%
And if it is the general VAT, then:
Price without VAT x 1,21.
Another option, which is a bit more confusing, is to have the price without VAT and multiply it by 21 and then divide it by 100. However, what you get here is the VAT itself, that is, the amount corresponding to VAT That you must then add to the price of the product without VAT for a total result.
In other words:
VAT (21%) = (Product / service price x 21) / 100
Or what is the same:
VAT (21%) = Product / service price x 0,21
And the total would be:
Total = Product price without VAT + VAT (calculated before)
How to calculate VAT from a VAT price
There are times when you need to know what the VAT is on something you have bought. Because you pay a total, but really, when you see the invoice, it has a breakdown of the price of the product on the one hand and the VAT on the other.
But How to know that figure if the one we have is the price with VAT? Well, the first thing is to know if that product or service falls within the super-reduced, reduced or general VAT.
If it is the super reduced, we have a perfect formula that we have given you before:
Total = Price without VAT x 1,04.
Here we know the Total and also the 1,04 which is the VAT. But not the price without VAT. So, with a little math, we turn it around:
Price without VAT = Total (price with VAT) / 1,04.
And, thus, we obtain the price of the product without VAT.
If it is the reduced one, the same formula should be followed, that is:
Price without VAT = Total (price with VAT) / 1,10.
And for the general:
Price without VAT = Total (price with VAT) / 1,21.