Sometimes it is like jinxed: every time you calculate the value of a commodity convert from gross to net you want to use, you will get a different result? don’t let it keep you from more important tasks and generate new revenue instead. Today I will show you how to even without a complicated rule of three any value added tax easily calculate and save yourself unnecessary trouble in the future!
Table of Contents
- Definition gross and net
- Calculate from net to gross
- Calculate from gross to net
- attention, trap: do not just deduct 19 percent from the gross amount
- My personal tip for you: try lexoffice free for one year!
- Can a sales tax calculator help?
- Which value added tax rate to use?
- difference between value-added tax, sales tax and input tax?
Gross or net: what is it actually?
Surely you have heard the terms "gross" and "net" many times before. not only do they come up when you calculate vat, but also, for example, when you create a payroll yourself (gross vs. net wage) or when you calculate the weight of an item (net weight = weight excluding packaging).
In general, you can define gross and net as follows:
- gross = the whole
- net = a part of the whole, minus a certain part (z. B. the sales tax)
in relation to the declaration of prices, this therefore means that the gross price the value-added tax included and the net price the adjusted pricewithout sales tax is. In the case of a tax-free service, the gross and net amounts are identical.
Do you find it difficult to distinguish between gross and net amounts?? These mnemonics will help you:
- Gross = gross(t)al high price, net = net(t) so much
- gross = bbefore anything is deducted, net = nafter something has been deducted
calculate sales tax – from net price to gross price
You would like to know, how much vat you on your item mark up need to sell it to the end customer? This is a simple percentage calculation: multiply the net price by the factor, which corresponds to the chosen sales tax rate:
19 percent tax: net price x 1.19 = gross sales price
7 percent tax: net price x 1.07 = gross sales price
Do you just want to find out, how much tax itself, which you will later have to pay to the tax office as value-added tax, calculate like this:
19 percent tax: net price x 0.19 = value added tax due
7 percent tax: net top price x 0.07 = value added tax due
example 119 percent sales tax
A product costs 200.00 euro net and is to be sold at 19 percent value added tax.
200,00 euro x 1,19 = 238,00 euro (gross price)
200,00 euro x 0,19 = 38,00 euro (vat amount)
Example 2: 7 percent reduced sales tax
A food item with a net value of 5.00 euros should be taxed at the reduced VAT rate of 7 percent:
5,00 euro x 1,07 = 5,35 euro (gross price)
5.00 euro x 0.07 = 0.35 euro (value added tax amount)
Invoices to private individuals
If you provide your services to private individuals (consumer), you must always indicate gross prices. The indication of net prices is considered non-transparent by end customers and can therefore result in warnings under competition law. statements like "prices are subject to. statutory value added tax" is only allowed in germany for companies.
Calculating sales tax – from gross price to net price
This is the calculation method that is most likely to cause difficulties: you are not familiar with the gross price including vat before and you have to find out, how much the product or service is net worth. This is interesting, for example, if you buy something as a businessman and you can claim the value-added tax amount as input tax at the tax office.
The calculate net price at a given gross amount them by dividing the gross price by the factor corresponding to the chosen sales tax rate:
- 19 percent tax: gross price : 1.19 = net price
- 7 percent tax: gross price : 1,07 = net price
Would you like determine the tax amount included in a gross price, calculate analogously:
- 19 percent tax: gross price : 1.19 x 0.19 = tax amount
- 7 percent tax: gross price : 1.07 x 0.07 = tax amount
example 119 percent sales tax
you want to buy as a company a notebook at the price of 476,00 euro including 19 percent vat. This is how you calculate the net amount and the tax amount:
476.00 euro : 1.19 = 400.00 euro (net price)
476.00 euro : 1.19 x 0.19 = 76.00 euro (tax)
example 2: 7 percent reduced sales tax
A caterer purchases food for the restaurant’s evening business at a price of 385.20 euros, including 7 percent reduced sales tax:
385,20 euro : 1,07 = 360,00 euro (net price)
385,20 euro : 1,07 x 0,07 = 25,20 euro (tax)
beware, trap: do not simply deduct 19 percent from the gross amount
since this mistake is often made, i would like to address it briefly: to get from the gross to the net, you may use your calculator do not simply deduct 19 percent. the following example shows why this does not work:
From net to gross:
100 euro net + 19 percent (19 euro) = 119 euro gross
From gross to net:
119 euro gross – 19 percent (22,61 euro) = 96,39 euro
as you can see: with this procedure you will no longer end up at the original net price, but below it. blame it on the fact that the tax base changed has: in the first step of the calculation you have calculated the 19 percent of 100 euro – but in the second step of 119 euro. Therefore, always use the above calculation method for your calculation of the amounts.
My personal tip for you: try lexoffice free for one year!
All beginnings are difficult. With lexoffice you can make your life as a company much easier. Finally, they no longer have to deal with gross or net and other accounting quarrels. start-ups and small businesses can now make real savings:
- One free test year if founded within the last 24 months
- Savings: 12 x 16.90 euro = 202.80 euro
- Uncomplicated processing without subscription obligation
- automatic end of membership after 12 months
- access for multiple users and the tax advisor
Would you like to know what lexoffice software can do for start-ups and small businesses?? In my lexoffice test report, I show you why it is particularly suitable for beginners with no previous experience!
Frequently asked questions about the calculation of sales tax
Can a sales tax calculator help?
If you still find it difficult to calculate the sales tax for your sales correctly? Simply use a sales tax calculator on the internet. Do you need this calculation often? Then make it up with the help of excel simply use a sales tax calculator yourself. To do this, simply transfer the above formulas into your excel-sheet. For example, your calculator for calculating from gross to net could look like this:
In the field A1 of your calculator, you later enter the gross amount to be converted.
When do companies actually have to use which value added tax rate??
Which sales tax rate you charge your customers on the net amount resp. paying in business is required by law in germany. Here are two tax rates to be distinguished:
- Standard tax rate: in the second half of 2020 the standard tax rate was 16 percent. From 2021 it will be 19 percent again. It is applied to all products and services that are not tax-exempt or subject to the reduced rate of value-added tax under § 4 of the German Value-Added Tax Act (Umsatzsteuergesetz).
- Reduced tax rate: the reduced tax rate according to § 12 abs is. 2 ustg from 2021 7 percent (in the second half of 2020 it was temporarily at 5 percent). It applies, for example, to food, live animals, wood or printed products, cf. For this purpose annex 2 of the sales tax law.
by the way: small entrepreneur calculate only the net amount in germany and hit no value added tax at all at. You therefore do not have to submit an advance return for sales tax. since you also cannot deduct input tax from purchased services, small business owners do not need a sales tax calculator.
In the grunderlexikon, you can also read when you as a company have to submit a sales tax return and an advance sales tax return.
What is the difference between value added tax, sales tax and input tax??
With the value added tax taxing the "add value" that is created during the production of a product or service. This is an umbrella term under which sales tax and input tax are located. The sales tax applies to goods or services that you supply yourself to consumers or businesses provide. Can you yourself deduct value added tax from incoming invoices", this amount paid to the tax office is referred to as the pretax.
Frequently asked questions
What to do now?
The correct calculation of gross and net is particularly relevant when writing invoices and when purchasing goods or employing subcontractors. Use a program for your company to create your invoices and gain valuable time for your business.