Products sold in your online store will (often) be subject to VAT, which you can set up yourself in your store settings. Most online stores display their prices inclusive of VAT, which is required for B2C sales. But how exactly is VAT calculated for your products?
Let's look at this example order:
Here, the prices for the two products plus shipping costs total €34.95. A VAT rate of 21% has been applied to the products and the shipping costs:
That means the price of €34.95 includes 21% VAT. So this price is actually 121%.
The same VAT rate is charged on shipping costs, so 21% as well.
Then you arrive at this calculation:
€ 39,90 / 1,21 = € 32,98
That is then the amount on which the VAT is calculated.
Note: The amount of VAT is calculated and rounded per product line. This is a valid calculation method for the tax authorities. This means that the total amount of VAT does not have to equal the VAT applied to the total amount.
Consider the following example:
The VAT amount here is:
€ 7,82 * (21 / 121) = € 1,36
€ 1,36 * 2 = € 2,72
Whereas if you were to calculate this from the total price, you would get a different number:
€ 15,64 * (21 / 121) = € 2,71