It can be tempting to try to calculate VAT by multiplying a price including VAT by the VAT rate (e.g. 0.25 for 25% VAT). However, this is incorrect. Remember that VAT is a mark-up on the price excluding VAT.
Here are the correct formulas:
To calculate the price including VAT:
Formula: Price excluding VAT * (1 + VAT rate)
Example:
If the price is €500 excluding VAT and the VAT rate is 25%, you calculate the price including VAT like this:
500 * 1.25 = 625 (incl. VAT)
In this case, it means that you add 25% to 500 kr, which is 125 kr, which is the VAT amount.
To calculate the price excluding VAT:
Formula: Price including VAT / (1 + VAT rate)
Example:
If the price is € 625 including VAT and the VAT rate is 25%, you calculate the price excluding VAT like this:
625 / 1.25 = 500 (excl. VAT)
This way you get the price back without VAT.