Formulas to include or exclude tax

What is VAT?

VAT (Value Added Tax) is a tax that is often added to goods or services. Each country or state defines it's own VAT rates (in percent).

For companies it is important to separate the price including and excluding VAT.

Basic calculations in Excel

If you have some problems with percentage calculations, have a look at this video which explains the basic rules for calculations in Excel.

Formulas to calculate price including tax

For all examples, we will use a VAT rate of 16%.

Calculate Tax (VAT)

If you have a product priced at 75 (excluding VAT), the VAT amount can be calculated as follows:

=75*16%     => 12

But in Excel, values are stored in cells. So your formula must use the cell references like this

=B4*C1

Price including VAT (Price + Tax)

To calculate the price including VAT, you just have to add the product price + the VAT amount.

=B4+C4

You can also calculate the value of your product with tax in a single formula.

=75+75*16%    =>87

Explanation of the calculation:

  • First, we take the price of the product (75)
  • And we add the calculation of the amount of tax for this product (75*16%)

Of course, you have noticed that you have 2 times the value "75" in the formula. So we can use a maths rule to simplify the formula. We extract the value 75 and write the rest with parenthesis.

=75*(1+16%)

And if you replace the value of the formula by the references of the cells, your formula is

=B4*(1+$C$1)

The dollars around the reference C1 mean that the reference is locked. It is call an absolute reference.

In this way you can copy the formula, and all the formulas are linked to cell C1.

Remove the tax (VAT)

The most interesting thing to do is to split a price into:

  • The price excluding tax
  • The tax

Calculate the price excluding tax (VAT)

To calculate the price of product excluding VAT, you have to divide the price of the product by 1+VAT rate.

=Full price/(1+Tax rate)

=B4/(1+$C$1)

Extract the tax only

The formula to extract only the tax from a price is:

=(Full price * Tax rate)/(1+Tax rate)

=(B4*$C$1)/(1+$C$1)

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