Value added tax (VAT) is a tax charged on the sale of most goods and services in Ireland. VAT is charged at diff erent rates for various goods and services.
Each year the Irish Government holds an annual budget in which VAT rates may increase or decrease. Value added tax (VAT) is a tax charged on the sale of most goods and services in Ireland.
We have already worked with VAT in Section A, Unit 5. In this unit, we will deal with more advanced problems involving VAT.
Worked example 1 John receives his electricity bill. The total bill, including VAT at 13·5%, is €215·65. (i) How much was the bill before VAT had been added? (ii) How much VAT had been added to the bill?
Solution (ii)
By the end of this section you should:
● understand to how to calculate the amount of VAT being charged on an item
● understand how to calculate the relevant rate of VAT, given the necessary values
Worked example 2
A farmer is purchasing new animals for his farm. The total bill was €2 515·20. This included a charge of €115·20 for VAT. (i) What was the bill for the animals before VAT was added? (ii) At what percentage rate was VAT charged?
Solution (i)
(ii)
VAT is always charged on the cost (original price) of an item or service.