VAT at 20% is the standard rate applied in France since 2014. Understanding its calculation is essential for individuals and professionals. Discover the methods for calculate VAT efficiently, whether to move from the price excluding tax (HT) to all taxes included (TTC) or the reverse.
Fundamentals of 20% VAT
Value Added Tax (VAT) is a indirect tax on consumption. Established in France in 1954 by Maurice Lauré, it has since spread to many countries. In France, the standard rate of 20% applies to the majority of goods and services since January 1, 2014.
Here are the key points to remember about 20% VAT:
- It represents more than 50% of the tax revenues of the French State
- Companies collect it from their sales and pay it back to the State
- Professionals can deduct the VAT paid on their purchases
- Other reduced rates exist: 10%, 5.5% and 2.1% for certain products or services
In the European Union, the standard VAT rate cannot be lower than 15%. Luxembourg applies the lowest rate (16%), while Hungary has the highest (27%). The United States, for their part, does not have a VAT but “dirty taxes” variable depending on the state.
Formulas and methods for calculating VAT
For calculate VAT at 20%, several options are available to you. Here are the main methods for switching from the amount excluding tax to including tax and vice versa:
- Calculation of the amount including tax from excluding tax: Amount including tax = Amount excluding tax × (1 + (VAT rate ÷ 100))
- Calculation of the amount excluding tax from the tax included: Amount excluding tax = Amount including tax ÷ (1 + (VAT rate ÷ 100))
- Calculation of the VAT amount: VAT amount = Amount including tax – Amount excluding tax
To simplify these calculations, you can use these tips:
- To quickly obtain the price including tax, multiply the price excluding tax by 1.2
- To find the price excluding tax, divide the price including tax by 1.2
Let’s take a concrete example with a product costing €100 excluding tax:
| Price excluding tax | VAT amount | Price including tax |
|---|---|---|
| 100€ | 20€ | 120€ |
Practical application of VAT calculation
Mastery of calculation of VAT at 20% is crucial for various professional and personal situations. Here are some concrete cases where these skills are useful:
- Business management: To quote, invoice customers or forecast costs
- Accounting : To correctly record transactions and prepare VAT returns
- Personal purchases: To understand the composition of the price of a good or service
- Commercial negotiations: To quickly assess margins and real prices
It is vital to note that VAT operates on a system of VAT collected and VAT deductible for businesses. VAT collected on sales is remitted to the state, while VAT paid on purchases can be deducted. This mechanism makes it possible to avoid double taxation and to tax only the value added at each stage of production and distribution.
Particularities and exceptions in the calculation of VAT
Although the 20% rate is the most common, there are special cases in the calculation of VAT that it is relevant to know:
- Reduced rates: Certain products and services benefit from reduced VAT rates (10%, 5.5% or 2.1%)
- Exemptions: Certain activities are exempt from VAT, such as medical services or education
- Basic franchise: Small businesses can benefit from an exemption from VAT invoicing under certain conditions
- Self-liquidation: In certain sectors, it is the customer who calculates and remits VAT, not the supplier
These particularities can complicate the VAT calculation, particularly for professionals working in specific sectors or with international activity. It is therefore crucial to know the rules applicable to your field of activity.
In summary, mastering the calculation of 20% VAT is an essential skill in today’s economic world. Whether you are an entrepreneur, accountant or simple consumer, this knowledge will allow you to better understand and manage your financial transactions. Do not hesitate to use the formulas and tips presented to simplify your daily calculations.