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