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How to Calculate VAT in South Africa?
What Is Value-Added Tax (VAT)?
A consumption tax known as value-added tax (VAT) is imposed on products and services at every step in the supply chain where value is added, from the point of initial production to the point of sale. The cost of the product less any expenses of components that have already been taxed at a prior step determines how much VAT the consumer must pay.
Example of VAT
Following is an illustration of how a 10% VAT might be applied sequentially across a production chain:
A trader sells raw materials made of various metals to a producer of electronic components. At this stage in the production process, the seller is the metals dealer. The dealer sends the government the 10% VAT after charging the manufacturer $1 plus a 10-cent VAT.
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How to Add VAT?
- Price multiplied by 15% VAT = Price X 1.15. For example, R75 X 1.15 = R86.25.
- The result of these calculations is your gross price, inclusive of VAT.
How to deduct VAT?
- To work out a price excluding VAT, you divide your price by 1.15 VAT Rate of 15%: Price / 1.15 = net price
- The result of this calculation is your net price, excluding VAT. For example: R175 / 1.15 = R152.17 = net price
