Value Added Tax, is calculated by determining the taxable value of a product or service and then multiplying that value by the VAT rate. The taxable value is obtained by subtracting the cost of the goods or services from the selling price. In other words, the formula for calculating VAT is:
VAT = VAT rate * taxable value
As an example, let’s say a product is sold for $100 and has a VAT rate of 20%. The calculation would be:
VAT = 20% * $100 = $20
