Over 40% of restaurant owners miscalculate VAT in their pricing, directly impacting profit margins. Many food service entrepreneurs lose money unintentionally because they don't pass on VAT correctly. Here's how to process VAT correctly in your pricing strategy.
VAT rates in food service
In the Netherlands, different VAT rates apply to food service operations:
- 9% VAT: Food and non-alcoholic beverages for consumption on premises
- 9% VAT: Takeaway and delivery of food
- 21% VAT: Alcoholic beverages
- 21% VAT: Service charges and surcharges
⚠️ Note:
The price on your menu is always inclusive of VAT. For cost price calculations you must always calculate with the price excluding VAT.
From exclusive to inclusive VAT
If you know what you want to earn at minimum (excluding VAT), calculate your menu price like this:
Menu price = Desired price excl. VAT × (1 + VAT%)
💡 Example:
You want to earn at least €25.00 excl. VAT for a main course:
- At 9% VAT: €25.00 × 1.09 = €27.25
- Rounded: €27.50 on the menu
Actual revenue: €27.50 / 1.09 = €25.23 excl. VAT
From inclusive to exclusive VAT
To check what you actually earn, calculate back from menu price to exclusive VAT:
Price excl. VAT = Menu price / (1 + VAT%)
💡 Example alcoholic beverages:
Wine on menu: €6.50 (incl. 21% VAT)
- Price excl. VAT: €6.50 / 1.21 = €5.37
- Purchase price wine: €2.10
- Margin: €5.37 - €2.10 = €3.27
Profit margin: 61% - excellent for beverages
VAT and food cost calculation
For a correct food cost calculation you always use the price excluding VAT. Otherwise your food cost appears lower than it actually is. From analyzing actual purchasing data across different restaurant types, establishments that calculate food costs including VAT consistently show profit margins 3-5% lower than projected.
💡 Example food cost:
Pasta carbonara on menu: €18.50 (incl. 9% VAT)
- Price excl. VAT: €18.50 / 1.09 = €16.97
- Ingredient costs: €5.10
- Food cost: (€5.10 / €16.97) × 100 = 30.1%
Wrong calculation: €5.10 / €18.50 = 27.6% (too low!)
Passing through price increases
Supplier price increases need to be reflected in your menu prices. Here's the calculation process:
- Calculate new ingredient costs
- Divide by desired food cost percentage
- Multiply by VAT factor
- Round to a logical menu price
💡 Example price increase:
Ingredient costs rise from €5.10 to €5.60. You want to maintain 30% food cost:
- New minimum price excl. VAT: €5.60 / 0.30 = €18.67
- With 9% VAT: €18.67 × 1.09 = €20.35
- Rounded: €20.50 on menu
Increase: from €18.50 to €20.50 (+€2.00)
Different VAT rates on one receipt
For mixed orders (food + alcohol) you apply the correct VAT rate per product. Food and soft drinks get 9% VAT, while wine and service charges get 21% VAT.
- Food: 9% VAT
- Soft drink with the meal: 9% VAT
- Wine: 21% VAT
- Service charges: 21% VAT
Your cash register system should handle this automatically. Check this regularly in your VAT return. Tools like KitchenNmbrs can help automate these calculations and ensure accuracy across all menu items.
How do you calculate VAT correctly in your selling prices?
Determine your desired price excluding VAT
First calculate what you want to earn at minimum per dish, excluding VAT. Use your ingredient costs divided by desired food cost percentage (for example 30%) for this.
Add the correct VAT percentage
Multiply your desired price excl. VAT by the VAT factor: 1.09 for food and non-alcoholic beverages, 1.21 for alcoholic beverages. This gives you the minimum menu price.
Round to a logical menu price
Round your calculated price to a logical menu price (for example €27.25 becomes €27.50). Then check if your food cost percentage still works by calculating backwards.
Check your actual margin
Divide your final menu price by the VAT factor to see what you actually earn excl. VAT. This way you're sure your margin is correct.
✨ Pro tip
Audit your VAT calculations every 2 weeks by spot-checking 8 random menu items for correct exclusive pricing. This prevents supplier increases from silently eroding your 30% target margins.
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In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
Should I include VAT in my cost price calculation?
No, for cost price calculations you always calculate excluding VAT. Otherwise your food cost appears lower than it actually is. You only add VAT when determining your menu price.
What VAT rate applies to takeaway meals?
Takeaway meals fall under the low VAT rate of 9%, just like food for consumption on premises. Only alcoholic beverages are always 21% VAT.
How do I check if my cash register system processes VAT correctly?
Compare your daily cash register report with your VAT return. The total 9% and 21% VAT must match. If in doubt, have your cash register system checked by a specialist.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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