Extract the VAT component by division
If a product is €100 before 20% VAT, the customer price is €120. To reverse that relationship, divide €120 by 1.20 to recover €100. Output VAT is the €20 difference. Subtracting 20% of €120 would remove €24 and understate revenue by €4.
Country standard rates are defaults for standard-rated goods. Product categories, special territories and seller circumstances can require a different treatment. Use the official country and product guidance before choosing the rate; the presence of a VAT field in a calculator does not determine liability.
Revenue excluding VAT = gross price / (1 + VAT rate); output VAT = gross price − revenue excluding VATIllustrative comparison at one €60 customer price
Holding gross price constant changes the amount available before costs when VAT differs. These calculations assume a standard-rated transaction and do not claim that every product uses the national standard rate.
At €60, 19% VAT leaves €50.42 before costs, while 27% leaves €47.24. That difference can influence the common-price comparison, but a local price, delivery or acquisition difference can be larger.
| VAT rate | Revenue excluding VAT | Output VAT |
|---|---|---|
| 19% | €50.42 | €9.58 |
| 20% | €50.00 | €10.00 |
| 21% | €49.59 | €10.41 |
| 23% | €48.78 | €11.22 |
| 27% | €47.24 | €12.76 |
Do not apply the platform rate to tax-exclusive revenue by default
For a straightforward €60 item sale with no shipping, coupons or refunds, a 9% platform fee on the assumed gross order base is €5.40. Applying 9% to the €50 revenue from the 20% VAT example would give €4.50 and understate the modelled fee by €0.90.
TikTok's commission guidance defines its own Net Sales, customer-shipping and refund terms. Retain those platform fields and calculate output VAT in an accounting column. Coupon-funded orders deserve particular care because the two official fee documents describe discount terms differently.
Choose one consistent basis for costs
If input VAT on a business expense is recoverable under the seller's actual treatment, a contribution model can use the cost excluding that recoverable tax. If the tax is irrecoverable, it remains a cost. Mixing gross supplier costs with net costs without explanation can distort product comparisons.
VAT on platform services and VAT on the goods sold to customers are not the same calculation. The published commission percentage includes applicable tax, so do not automatically add another country VAT multiplier to it. Inspect the service invoice and applicable accounting treatment.
- Confirm the sales transaction's VAT treatment.
- Extract output VAT from gross sales using the correct rate.
- Calculate platform commission from its own defined base.
- Enter each expense with recoverable tax treated consistently.
- Keep invoice and tax records separate from the planning estimate.
When should the simple single-rate model be expanded?
Mixed-rate baskets, destination exceptions, marketplace tax collection and cross-border structures can require more detail than one VAT percentage. Resolve the transaction's treatment first, then calculate its economics; a model should not guess the legal answer from the seller's country alone.
If the same product is sold through several fulfilment routes, retain enough context to explain why the tax treatment differs. A pricing scenario can still be useful, but label the tax assumption until the underlying route and obligations are confirmed.