VAT Calculation: Formulas and Examples

As a VAT-registered freelancer in Germany, correctly calculating VAT is one of your most important tasks. Every invoice you issue must contain the correct VAT. Every purchase you make requires the correct calculation of input VAT. It may sound complicated, but with the right formulas and some practice, it becomes routine.

VAT, also called sales tax, is 19% in most cases in Germany. This standard rate applies to the vast majority of goods and services – from professional consulting services to software and digital products to most business services. There’s also a reduced rate of 7% for books, printed materials, food in restaurants, public transportation, and hotel accommodations. In special cases, such as exports outside the EU or intra-community supplies, a zero rate of 0% may also apply.

Understanding the Basic Formulas

VAT calculation is based on two basic formulas you should know. The first formula converts a net amount to a gross amount – that is, adds VAT. The second formula does the opposite: It calculates VAT from a gross amount to get the net amount.

When you issue an invoice, you usually start with the net amount – the amount you want to receive for your service. To calculate the gross amount that your customer actually has to pay, you multiply the net amount by 1.19 (at 19% VAT). An example: If you charge 1,000 EUR net for a consulting service, the gross amount is 1,000 × 1.19 = 1,190 EUR. The VAT is 190 EUR.

The reverse calculation is just as important, especially when you receive invoices. If you receive an invoice for 1,190 EUR gross, you need to know how much of that is actually the service cost and how much VAT you can deduct as input VAT. To do this, you divide the gross amount by 1.19. In our example: 1,190 ÷ 1.19 = 1,000 EUR net. The VAT of 190 EUR can be deducted as input VAT.

Practical Application in Daily Business

In daily business, you’ll constantly apply these calculations. Imagine you’re creating an invoice for 2,500 EUR net for an extensive consulting service. The calculation is simple: 2,500 × 0.19 = 475 EUR VAT. The gross amount you show on the invoice is 2,975 EUR. This calculation should be clearly shown on every invoice, with net amount, VAT rate, VAT amount, and total amount.

But it gets more complicated when you have invoices with different VAT rates. Perhaps you sell both consulting services (19%) and books (7%). In this case, you must calculate each item separately. The consulting costs 1,000 EUR net, so 1,190 EUR gross with 190 EUR VAT. The book costs 20 EUR net, so 21.40 EUR gross with 1.40 EUR VAT. The total invoice amount is then 1,211.40 EUR gross, with total VAT of 191.40 EUR.

A common mistake many freelancers make is incorrectly calculating VAT from a gross amount. If you take 19% of 1,190 EUR, you get 226.10 EUR – that’s wrong. The correct method is to divide the gross amount by 1.19 to get the net amount, and then calculate the difference. Or you use the formula: VAT = Gross Amount × (0.19 ÷ 1.19), which directly gives 190 EUR.

Calculating Input VAT Correctly

Input VAT is the VAT you pay on your business purchases. You can deduct this from the VAT you collect from your customers. The calculation works the same way as calculating VAT from a gross amount.

If you buy software for 1,190 EUR gross, you can deduct the input VAT of 190 EUR. This means you effectively pay only 1,000 EUR net for the software. This input VAT is taken into account in your VAT return. If you’ve collected 1,900 EUR VAT from customers and paid 500 EUR input VAT on expenses, you only need to pay 1,400 EUR to the tax office.

Correctly calculating input VAT is important because it reduces your actual business costs. Every euro of input VAT you don’t calculate correctly costs you money. Modern accounting software like Solobooks handles these calculations automatically – you just enter the gross amount, and the software automatically calculates net and input VAT.

Excel Formulas for Practice

If you use Excel or Google Sheets for your accounting, you can build these formulas directly into your spreadsheets. To calculate net to gross, you use the formula =A11.19, where A1 is the net amount. For the reverse calculation, gross to net, you use =A1/1.19. To calculate VAT directly from a gross amount, you can use =A1-A1/1.19 or =A10.19/1.19.

These formulas also work with the reduced rate of 7%. Simply replace 1.19 with 1.07 and 0.19 with 0.07. This way you can quickly switch between different VAT rates, depending on which services you offer.

Avoiding Common Mistakes

One of the most common mistakes in VAT calculation is rounding errors. If you have many items on an invoice and round each one individually, rounding errors can accumulate. The solution is to always calculate with full precision and only round at the end. Modern accounting software does this automatically correctly.

Another common mistake is using the wrong VAT rate. If you accidentally use 19% instead of 7% or vice versa, it leads to incorrect amounts on the invoice. This can cause problems, especially if the invoice has already been paid. The solution is to always check which rate applies to which service, and if uncertain, look it up or ask a tax advisor.

Particular care is needed with discounts and cash discounts. The discount is always applied to the net amount, not the gross amount. So if you grant 10% discount on 1,000 EUR net, the new net amount is 900 EUR. VAT is then calculated on this new net amount: 900 × 0.19 = 171 EUR. The gross amount is 1,071 EUR.

Using Automation

While it’s important to understand the formulas, you don’t need to apply them manually all the time in daily life. Modern accounting software like Solobooks handles all calculations automatically. You just enter the net amount, and the software automatically calculates VAT and gross amount. If you enter a gross amount, the software automatically calculates net and VAT.

The software also supports different VAT rates and automatically selects the correct rate for each service. For mixed invoices with different rates, everything is correctly split. Input VAT is automatically recognized and categorized, and at the end you have all data for your VAT return.

This automation not only saves time, but also reduces errors. Human calculation errors are eliminated, and you can rely on all calculations being correct. The software also automatically validates whether all mandatory information is on the invoice and warns you if something is missing.

The VAT Return

At the end of each month or quarter, you must file a VAT return. This shows how much VAT you’ve collected, how much input VAT you’ve paid, and how much you need to pay to the tax office or get back.

The calculation is simple: VAT to pay = VAT collected - Input VAT. So if you’ve collected 1,900 EUR VAT and paid 500 EUR input VAT, you need to pay 1,400 EUR. If you’ve paid more input VAT than VAT collected, you get the difference back.

The deadlines depend on your situation. If your VAT liability is over 7,500 EUR per year, you must file monthly, by the 10th of the following month. Otherwise, a quarterly filing is sufficient, also by the 10th of the month after quarter end. Modern accounting software prepares all data for the return and can even submit it directly to ELSTER.

Conclusion

Correctly calculating VAT is essential for every VAT-registered freelancer. The basic formulas are simple: Net to gross you multiply by 1.19, gross to net you divide by 1.19. With some practice, these calculations become routine.

But you don’t need to calculate everything manually. Modern accounting software like Solobooks handles all calculations automatically. You don’t need to memorize formulas – the software always calculates correctly, supports different VAT rates, and prepares everything for your VAT return. This way you can focus on your business while technology handles the calculations.

Need Help?

If you have questions about VAT calculation or need help with accounting, we’re here to help. Contact us by email at support@solobooks.de, chat with us in the app, or visit our Help Center for more guides.

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Last updated: November 1, 2025