Value added tax
- Price with tax = Price without tax + Tax value
- Tax value = Tax% * Price without tax
- Price with tax = Price without tax + Tax% * Price without tax = (1 + Tax%) * Price without tax
- In conclusion:
Price with tax = (1 + Tax%) * Price without tax ... if one knows the price without tax
Price without tax = Price with tax / (1 + Tax%) ... if one knows the price with tax
How to calculate the value with tax (add tax to the value without tax)
- If Tax rate is 20%, (1 + Tax%) = 1 + 20% = 100/100 + 20/100 = 120/100 = 1.20 => Price with tax = 1.20 * Price without tax, and Price without tax = Price with tax / 1.20
- If Tax rate is 5%, (1 + Tax%) = 1 + 5% = 100/100 + 5/100 = 105/100 = 1.05 => Price with tax = 1.05 * Price without tax, and Price without tax = Price with tax / 1.05
- If TAX rate could ever be 124%, (1 + Tax%) = 1 + 124% = 100/100 + 124/100 = 224/100 = 2.24 => Price with tax = 2.24 * Price without tax, and Price without tax = Price with tax / 2.24
Examples of Tax adding calculations:
VAT (value added tax)
VAT is a tax borne by the final consumer of the good or service.
VAT is a tax charged of each economic agent involved in the business cycle of manufacturing of a product or providing a service within the scope of taxation. VAT, charged by the operators, is transferred to the state budget.
VAT is universal, applying to all goods deriving from current operating activity and also from financial activity of using the available capital.
VAT is a tax neutral and unique, applying to all economic activities, irrespective of the extent of the economic circuit. VAT is calculated for each stage in the production and marketing of intervening economic asset.
There are standard VAT rates in effect, for example the standard VAT rate could be 20%, and some reduced rates could be 9% and 5% respectively, for example.