The calculation of VAT is based on the contract under the law of obligations concluded between the supplier and the recipient of the service. The decisive factor is whether a net price or a gross price was agreed between the contracting parties (so-called net price or gross price agreement). Depending on this, the VAT is determined by applying the applicable tax rate (19 % or 7 %) to the net amount or by deducting it from the gross amount
A tradesman repairs the entrance door of a retail shop. He agrees a price of € 500 net with the owner.
The repair carried out is subject to VAT. The assessment basis for the tax calculation is € 500. The turnover tax amounts to € 95 (19 % of € 500).
In the case of so-called gross prices, the sales tax is calculated by subtracting it from the total amount.
A bookshop sells a paperback book (reduced tax rate of 7 %) at a price of 10.70 €. The sales tax included in the price is calculated by deducting it from the gross price (7/107 of 10.70 €) and amounts to 0.70 €.