How to Extract VAT from an Amount
Extracting VAT means calculating the portion of the total amount attributable to tax. If an amount already includes VAT, the tax cannot be determined by simply multiplying the entire amount by the rate: the VAT-exclusive value must first be separated. The general formula is as follows: VAT = VAT-inclusive amount × rate / (100 + rate). The VAT-exclusive amount is determined as the difference between the total amount and the extracted tax. In 2026, at a VAT rate of 16%, the formula is: VAT = VAT-inclusive amount × 16 / 116.
It is important to distinguish between two actions:
- add VAT on top — calculate tax on the VAT-exclusive value;
- extract VAT from an amount — determine the tax already included in the total value.
In the first case, the VAT-exclusive value is multiplied by 16%. In the second case, the calculated rate of 16/116 is used. Substituting one formula for the other results in an incorrect tax amount and distorts the VAT-exclusive value.
Before performing the calculation, the accountant should verify whether the stated amount actually includes VAT. This must follow from the contract and the transaction documents. For VAT to be credited, the tax amount must be stated in a document prescribed by the Tax Code, and the purchased goods, work or services must be used or intended for use for the purposes of taxable turnover (Article 480 of the Tax Code of the RK). The mere presence of a total amount does not mean that it includes VAT.
Extracting VAT from an Amount: Verification Procedure
It is better to begin the practical calculation not with the formula, but by classifying the transaction. The sequence may be as follows:
- Determine the date on which the turnover occurred and the tax conditions applicable on that date.
- Verify whether the supplier is a VAT payer and whether tax has been charged on the relevant transaction.
- Establish whether the transaction relates to taxable or non-taxable turnover.
- Clarify from the contract and source documents whether tax is included in the agreed price or charged on top of it.
- Verify the rate applicable to the transaction.
- Extract the tax from the total amount and verify the rounding.
If the contract contains the wording “the price includes VAT,” the total value is treated as a VAT-inclusive amount, and the 16/116 formula is used to extract VAT. If it states “excluding VAT,” this amount is the VAT-exclusive value: when VAT is charged, the rate of 16% is applied to it. The wording “including VAT” must make it possible to determine both the total value and the amount of tax included in it.
For verification purposes, it is useful to perform the reverse calculation: add the calculated VAT-exclusive value and the extracted tax. The result must match the original total amount, taking into account the applied rounding rule.
Special attention is required in cases of partial payment, returns, value adjustments, discounts, supplies consisting of mixed items, or several transactions subject to different tax treatments. In such situations, tax should not automatically be extracted from the entire payment as a single line item. The amount is first matched to the relevant transactions based on the contract and source documents, after which VAT is calculated for each portion whose price includes tax.
Is VAT Extracted from Commission?
In the case of commission, the answer depends on the specific amount concerned. The commission fee and the funds transferred in connection with carrying out the assignment are recorded separately in the documents. For the calculation, the accountant must analyze:
- the amount of the commission agent’s fee;
- the amount attributable to goods, work or services;
- additional expenses and their reimbursement;
- the VAT status of the parties to the transaction;
- the terms of the contract and source documents;
- the tax treatment of the relevant turnover.
VAT is extracted from the commission if the fee is stated in the documents as a VAT-inclusive price. At a rate of 16%, tax is calculated from such an amount using the 16/116 formula. If the fee is set excluding VAT and tax is charged on the transaction, VAT is calculated on top at a rate of 16%. If the documents do not show VAT as part of the commission, the calculated rate may not be applied to the withheld amount solely because it was withheld.
For example, the phrase “the commission is withheld from the amount being transferred” describes the settlement method but does not determine whether VAT is included in the fee. The calculation requires terms governing the service price and documents stating the fee amount and the tax charged. The VAT amount credited by the recipient must be stated in a document prescribed by the Tax Code (Article 480 of the Tax Code of the RK).
If purchased goods, work or services are used simultaneously for taxable and non-taxable turnover, the procedure for determining the VAT allowed as a credit depends on the accounting method applied. Under the proportional method, the allowed amount is determined based on the ratio of taxable turnover to the total taxable and non-taxable turnover (Article 488 of the Tax Code of the RK). Under separate accounting, VAT on purchases used for taxable turnover is accounted for separately from VAT on purchases for non-taxable turnover, while tax on common purchases is allocated according to the prescribed formula (Article 489 of the Tax Code of the RK).
What the Accountant Should Check Before Recording the Transaction
The calculation formula is only a technical step. Correct accounting requires documents confirming the price, nature of the turnover and tax charged. Before recording the transaction, the contract, source document, invoice for payment, electronic invoice and bank statement should be reconciled if these documents were prepared for the transaction. The VAT amount, VAT-exclusive value and total amount must be consistent with one another.
Merely extracting VAT arithmetically from the total value is insufficient for claiming a credit. The recipient must be a registered VAT payer, the tax amount must be payable for the goods, work or services received and stated in the relevant document, and the purchase must be used or intended for use for the purposes of taxable turnover (Article 480 of the Tax Code of the RK).
If the accounting software calculated the tax automatically, the result should be checked manually. A discrepancy may be caused by an incorrect indication of whether tax is included in the price, an incorrectly selected rate, an incorrect date, rounding, or applying the same setting to every line of the document.
Particular care should be taken when correcting documents from previous periods. First, it is necessary to determine the amount agreed by the parties, the tax stated in the issued documents and the turnover to which the correction relates. If the adjustment affects VAT previously credited, it should be recorded in accordance with the rules on excluding, increasing or decreasing such tax (Article 480 of the Tax Code of the RK).
When purchases are used simultaneously for taxable and non-taxable turnover, merely extracting VAT from the price is not sufficient. Under the proportional method, the portion of tax allowed as a credit is calculated based on the turnover ratio (Article 488 of the Tax Code of the RK). Under separate accounting, the purpose of purchases is determined separately, while VAT on common purchases is allocated between amounts allowed and not allowed as a credit (Article 489 of the Tax Code of the RK).
Frequently Asked Questions
How do I extract VAT from an amount if the tax is already included in the price? — At a rate of 16%, multiply the VAT-inclusive amount by 16 and divide it by 116. The VAT-exclusive value equals the difference between the total amount and the calculated tax.
Can I simply multiply the total amount by the VAT rate? — No. Multiplication by 16% applies when VAT is charged on the VAT-exclusive value. To extract tax from the total amount, the 16/116 calculation is used.
Is VAT always extracted from a bank commission? — No. VAT is extracted from a commission if the service documents state that tax is included in its amount. The mere fact that the commission was debited or withheld is insufficient for such a calculation.
What should I do if the contract does not state whether VAT is included in the price? — Compare the terms of the contract with the invoice for payment, acceptance certificate, delivery note, electronic invoice and other issued documents. The calculation must correspond to the documented price and the stated tax amount.
Why does the VAT amount in the accounting software differ from the manual calculation? — Check whether tax is indicated as included in the price, the 16% rate, the transaction date, the rounding procedure, individual document lines and the selected method for determining the amount of VAT allowed as a credit.
Sources
Tax Code of the Republic of Kazakhstan: Article 480 “Value-Added Tax Credited”.
Tax Code of the Republic of Kazakhstan: Article 488 “Procedure for Determining Amounts of Value-Added Tax Allowed as a Credit under the Proportional Method”.
Tax Code of the Republic of Kazakhstan: Article 489 “Procedure for Determining Amounts of Value-Added Tax Allowed as a Credit through Separate Accounting”.