Another VAT question

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Bubbles34

Registered User
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I have a small shop and am still pretty new to this and have a VAT related question.

Let's say I am buying a product for 4 Euros and put a 100% Markup on it

then I sell it for 8 Euros - how much VAT do I have to pay to the Revenue Commissioner. Is it 21.5 % of the 8 Euros?

When I look at receipts of other Retailers it somehow looks different.
Example: I bought a product for 40.73 and the VAT is 7.20, not 8.76

How do you get that?
 
The 40.73 already includes the VAT. The total price is therefore equal to 121.5% - 100% plus 21.5%. The VAT is therefore calculated by dividing the 40.73 by 121.5 -this gives 1% - to get 21.5% simply multiply the result by 21.5.
40.73 divided 121.5 multiplied by 21.5 = 7.20.
Assuming the €8 is a 21.5% supply the VAT therein is 1.42.
 
In the example you gave of buying goods for €40.73 the VAT is INCLUDED in the sale, so it's not 21.5% of €40.73 but 21.5% of and amount which when you add the VAT onto it brings the total up to €40.73. IN that case it's 21.5% of €33.53 which is €7.20 and when you add the two together you get €40.73.

On the mark-up issue, if you buy for €4.00 (incl VAT) and sell for €8.00 (incl VAT) then the figures come out at
Sale €8.00 VAT €1.41 net sale €6.59
Pch €4.00 VAT €0.71 net pch €3.29
Net VAT to Revenue €0.70
Net profit to you €3.30

You can get VAT included in an amount of say €4.00 including VAT by dividing by 1.the VAT rate and then multiplying the result by the VAT rate :-
€4.00 / 1.215 = €3.29
€3.29 * .215 = €0.71

To get VAT at 21.5% on top of an amount say 4.00 + VAT it's 4.00 *.215
 
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