How do I calculate the value added tax for my products?
June 16, 2024 | 30,00 EUR | answered by Friedhelm Sauer
Dear tax advisor,
My name is Valentina Walter and I run a small online shop where I sell handmade jewelry. So far, I have never dealt with the topic of value added tax as I did not have any taxable sales. However, I now want to expand and sell internationally. Therefore, I would like to know how to correctly calculate the value added tax for my products.
My products have different prices and I am unsure how to correctly add the 19% value added tax to the selling prices. I also wonder if I need to calculate the value added tax on shipping costs and if there are any exceptions or special regulations that I should consider.
As a small business owner who has so far opted out of the application of VAT regulations, I am unsure how to proceed. I do not want to make mistakes and have problems with the tax authorities. Therefore, it would be very helpful for me if you could explain to me step by step how to correctly calculate the value added tax and how to correctly record it in my accounting.
I look forward to your professional advice and hope that you can help me clarify my questions regarding value added tax.
Thank you in advance.
Sincerely,
Valentina Walter
Dear Mrs. Walter,
Thank you for your inquiry and your interest in my consultation on value added tax. It is understandable that you are unsure about how to correctly calculate and account for the VAT on your products, especially since you were previously exempt from the sales tax regulations as a small business owner.
As an online shop operator selling handmade jewelry, you must correctly calculate the VAT on your products if you want to sell abroad. The VAT rate in Germany is usually 19%, but there are also reduced rates of 7% for certain goods and services. To correctly add the VAT to your selling prices, you must increase the net price of your products by the corresponding VAT rate.
Example: If the net price of a piece of jewelry is 50€ and the VAT rate is 19%, the gross amount (including VAT) is 59.50€.
Yes, you also have to calculate the VAT on the shipping costs. These are considered taxable ancillary services to the main business and must also be subject to the corresponding VAT rate.
There are exceptions and special regulations in the area of VAT that you should be aware of. For example, there is the option of the VAT small business regulation, which allows businesses with an annual turnover of less than €22,000 to waive the calculation and remittance of VAT. However, when conducting cross-border transactions with customers in EU countries, you must comply with the VAT rules applicable there.
To correctly account for VAT, I recommend maintaining proper bookkeeping and keeping all relevant sales tax documents. You should regularly submit VAT returns to the tax office and account for the VAT in accordance with legal requirements.
I hope this information helps you and answers your questions regarding VAT. If you have any further questions or require more detailed consultation, I am happy to assist.
Best regards,
Friedhelm Sauer
