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This question, which may seem simple, can reveal certain difficulties. The calculation of VAT has certain subtleties such as the calculation of VAT internally (from NET to Gross , the reverse calculation of VAT), the breakdown of ancillary costs in the case of products subject to different rates or even the management of roundings.
Excluding Tax is the tax base or taxable base of the operation: this corresponds to the amount on which value added tax (VAT) is applicable: it is the price of goods or services.
In simple situations, such as when A sells goods to B for 100 euros, the tax base is 100 euros. A must charge B the VAT calculated on this amount at the appropriate rate, and B must pay A 100 euros plus the VAT amount (€20 at the standard French VAT rate).
For supplies of goods and services, the tax base includes:
Anything that constitutes the consideration obtained or to be obtained by the supplier or service provider for these transactions from the purchaser, the lessee or a third party (including subsidies directly linked to the price of the transaction).
Thus, the following are included in the tax base:
• Taxes, duties, levies and taxes, with the exception of VAT itself;
• ancillary costs (commission, packaging, transport and insurance costs, etc.) that the supplier passes on to the purchaser;
• Subsidies directly linked to the price of the operation.
On the other hand, the following are excluded from the tax base:
• Price decreases as a discount for early payment.
• Price rebates and rebates granted to the purchaser or lessee and acquired at the time the transaction is carried out.
• Amounts received by a taxable person from his purchaser or lessee, in reimbursement of expenses incurred in the name and on behalf of the latter and which are recorded in his accounts in transit accounts (so-called “disbursements”).
In case of payment in a foreign currency, the applicable exchange rate is the last selling rate recorded at the time VAT becomes due, on the markets.
Businesses have the option of using the most recent exchange rate published by the European Central Bank, using the euro exchange rate for conversion between currencies other than the euro.
Note: for some transactions, administrations may authorize the use of monthly rates (for example for intra-community imports or acquisitions in France).
As a reminder, VAT is payable is determined as follows:
- For services, in connection with the receipt of the price or a deposit. In the event of an option for debits by the supplier, VAT is due at the time of invoicing. As an exception, in the case of services where VAT is due by the customer under the international reverse charge mechanism, VAT is due upon completion of the service;
- For supplies of goods, VAT is due upon receipt of advance payments (since 2023) or upon delivery understood as the transfer of ownership of the goods (right to dispose of the goods as an owner).
To calculate VAT from the amount excluding taxes (excluding taxes), simply apply the appropriate VAT rate to the amount excluding taxes (excluding taxes).
The formula is as follows: VAT = Gross × (VAT rate/100).
For example, if the amount excluding taxes is 100 euros and the VAT rate is 20%, then the VAT will be equal to 100 × (20/100) = 20 euros. By adding VAT to the amount excluding taxes, you get the price including all taxes (NET).
To help you, we have set up an automatic calculator available here.
The list of formulas for each rate is available here: VAT formula cheat sheet.
To obtain the taxable base from a price including all taxes (NET), a conversion coefficient obtained according to the following formula must be applied to the price including VAT:
Tax base = Price including VAT/ (1 + VAT Rate), where Rate is the legal VAT rate.
For example, for a property at 5.5% (VAT calculation at 5.5%):
- Sales price 525 euros including VAT: 525/ (1 +5.5%) = 500
This calculation is particularly useful when it comes to VAT on margin or when setting up accounting software.
The list of formulas for each rate is available here: VAT formula cheat sheet.
It should be noted that theoretically, the use of rounded numbers is required only at the time of the result. However, the tax authorities provide conversion coefficients in the BoFIP that are rounded to the thousandth. For example, the administration indicates:
• For a VAT rate fixed at 20%: 0.833
• For a VAT rate fixed at 5.50%: 0.947
• For a VAT rate fixed at 10%: 0.909
• For a VAT rate fixed at 2.10%: 0.979
In some cases, this may result in an “overestimation of VAT.”
In principle, in the event of an audit, the administration wishes to ensure that the VAT paid is at least equal to the amount of VAT calculated in the NET. Thus, an overestimation of VAT does not create any risk but may result in a loss for the service provider or the seller.
For example, the strict calculation on a VAT amount of 120 euros makes it possible to identify a VAT amount of 20 euros. With the authorities' coefficients, we are able to donate 20.04 euros.
Quick tip: in the case of a transaction at the standard rate, determining VAT is the same as dividing the price by 6.
To help you, we have set up an automatic calculator available here.
As mentioned earlier, ancillary costs must be taken into account in the tax base.
For example, the transport costs charged by the seller to his customer are part of the taxable sales price.
Transport costs incurred by a company to deliver goods for which it remains responsible until delivery to the purchaser must be considered part of the selling price of the goods.
In the absence of contractual or commercial indications to the contrary, the total invoiced transport amount should be distributed proportionally between the elements of the order, according to the VAT rate specific to each operation.
For a single transaction (a good sold or a single complex transaction such as a package), the transport VAT rate follows that of the main transaction.
On the other hand, for separate transactions, the transport VAT rate follows that of each separate operation: this is the case, for example, if you sell a food item at 5.5% and a good at the standard rate. Transport must be allocated to each good (based on the price) and therefore be subject to the rate of 5.5% for one part and 20% for the other part.
This would not be the case if the e-merchant indicates, for example, a transport price for each good on the product presentation page.
Note: the costs can be separated from the amount of the sale if their nature corresponds to a distinct and clearly remunerated provision of services outside the main transaction.
The Court of Justice of the European Union has ruled that each Member State is free to determine its own rounding rules as long as they ensure the correct collection of tax. In France, the tax authorities expect VAT to be calculated ultimately so that the VAT included in the price paid by the customer including VAT can be collected.
In this context, the tax authorities would tend to proceed as follows:
For example, if the tax authorities audit a supermarket with a turnover of €1,500 and several VAT rates:
It will therefore proceed as follows:
Alternatively, the taxpayer could theoretically invoke the benefit of the administrative doctrine (BOI-TVA-LIQ-10-20140919) by calculating as follows :
In many situations, we do not believe that this method is appropriate for sales, as it may increase the amount of VAT payable by the vendor. In all cases, the calculation method must not result in a loss of VAT for the Treasury. In a decision handed down by the Versailles Administrative Court of Appeal, a company was condemned for always rounding down the VAT amounts. As a result, the difference between the NEt amount and the sum of the VAT paid + the Gross was significant (CAA Versailles 21-5-2013 n° 11VE03306, 1st ch.). We must therefore be vigilant.
As a reminder, VAT returns do not include centimes.
The various taxable bases and the corresponding tax amounts are rounded to the nearest euro.
Tax bases equal to €0.50 are counted as €1 (article 26 of law 98-546 of 2 July 1998).
As a reminder, VAT returns do not include centimes.
The various tax bases and the corresponding tax amounts are rounded to the nearest euro. Tax bases equal to €0.50 are counted as €1 (article 26 of law 98-546 of 2 July 1998).
In this way, the tax authorities apply the above-mentioned reasoning to the entire turnover and try to establish whether there are any discrepancies.
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