How do you convert VAT-inclusive prices to VAT-exclusive amounts?
The formulas for 15% VAT in both directions, with worked examples in rand.
To convert a VAT-inclusive price to the amount before VAT, divide it by 1.15. The VAT is the inclusive price multiplied by 15 and divided by 115. To add VAT to a price before VAT, multiply it by 1.15, or multiply it by 0.15 to get the VAT alone. For example, R1,150 including VAT is R1,000 before VAT, and the VAT is R150. R2,000 before VAT carries R300 VAT and totals R2,300. These formulas apply to standard-rated supplies at 15%. Zero-rated and exempt supplies have no VAT to separate. Round to the nearest cent and show the VAT-exclusive value, the VAT and the total on the invoice. 4invoices lets you set the tax rate on each line; check your rounding against your own records.
- Inclusive to exclusive: divide by 1.15.
- VAT inside an inclusive price: multiply by 15 and divide by 115.
- Exclusive to inclusive: multiply by 1.15.
- Applies only at the 15% standard rate.
How it works
Start from the price you have. Note whether it includes VAT or not.
Inclusive price to exclusive: divide by 1.15. R575 divided by 1.15 is R500.
Find the VAT in an inclusive price: multiply by 15 and divide by 115. R575 x 15 / 115 = R75.
Add VAT to an exclusive price: multiply by 1.15. R500 x 1.15 = R575.
Show the split on the invoice. Show the value of the supply, the VAT and the total. Round to whole cents.
Legal references
- Value-Added Tax Act 89 of 1991, section 7 - VAT charged at the standard rate on the value of the supply.
- Value-Added Tax Act 89 of 1991, section 20 - tax invoice shows the value, the tax charged and the total.
Frequently asked questions
How do I take VAT off a price?
Divide the VAT-inclusive price by 1.15. R2,300 divided by 1.15 is R2,000, and the VAT is R300.
How do I add 15% VAT to a price?
Multiply by 1.15. R1,000 becomes R1,150. To get only the VAT, multiply by 0.15.
Why is the VAT not 15% of the inclusive price?
Because the inclusive price already contains the VAT. The VAT is 15/115, about 13.04%, of the inclusive price.
Does 4invoices calculate this for me?
4invoices applies the tax rate you set on each invoice line. It does not decide the rate for you and does not file returns. Use the tax invoice rules to check what your invoice must show.