Every month, restaurant owners lose hundreds of euros because they miscalculate VAT on purchase prices. Most suppliers quote prices including VAT, but your food cost calculations need the excluding VAT amount. Here's how to convert between both accurately.
VAT rates in hospitality
Before you start calculating, you need to know which VAT rates apply:
- Food items: 9% VAT
- Alcoholic beverages: 21% VAT
- Kitchen equipment: 21% VAT
- Cleaning supplies: 21% VAT
These rates determine how you calculate your purchase prices for food cost analysis.
From inclusive VAT to exclusive VAT
Most suppliers provide prices including VAT on their invoice. But you need the price excluding VAT for food cost calculations.
💡 Formula:
Price excl. VAT = Price incl. VAT ÷ (1 + VAT%)
- At 9% VAT: Price incl. VAT ÷ 1.09
- At 21% VAT: Price incl. VAT ÷ 1.21
💡 Example:
Your supplier charges €10.90 for ground beef (incl. 9% VAT):
- Price excl. VAT: €10.90 ÷ 1.09 = €10.00
- This is the amount you use in your food cost calculation
For wine at €12.10 incl. VAT (21%):
- Price excl. VAT: €12.10 ÷ 1.21 = €10.00
From exclusive VAT to inclusive VAT
Sometimes you receive price lists excluding VAT and want to know what you'll actually pay.
💡 Formula:
Price incl. VAT = Price excl. VAT × (1 + VAT%)
- At 9% VAT: Price excl. VAT × 1.09
- At 21% VAT: Price excl. VAT × 1.21
Why this difference matters
For your food cost calculation you always use the price excluding VAT. Why?
- You also calculate your selling price excluding VAT
- VAT gets passed through to the customer
- Your food cost percentage only works correctly with excl. VAT prices
⚠️ Warning:
If you calculate with inclusive VAT prices, your food cost appears lower than it actually is. This is something most kitchen managers discover too late - they're unknowingly running at a loss on popular dishes.
Practical tips for purchasing
To avoid mistakes with purchase price calculations:
- Always note whether a price is inclusive or exclusive VAT
- Create a standard Excel sheet with the formulas
- Check your supplier's invoice if in doubt
- Use tools like KitchenNmbrs that automatically convert
💡 Example mixed purchase:
You order for a pasta dish:
- Pasta: €3.27 incl. 9% VAT = €3.00 excl. VAT
- Wine for sauce: €12.10 incl. 21% VAT = €10.00 excl. VAT
- Parmesan: €21.80 incl. 9% VAT = €20.00 excl. VAT
Total purchase costs excl. VAT: €33.00
How do you calculate purchase prices correctly? (step by step)
Check the VAT rate
Look at the invoice to see if it's food items (9% VAT) or alcohol/equipment (21% VAT). This determines which formula you use.
Convert to exclusive VAT
Divide the price including VAT by 1.09 (at 9%) or by 1.21 (at 21%). This gives you the actual purchase price for your food cost calculation.
Note both prices
Keep both the price including VAT (for your administration) and excluding VAT (for food cost calculation). This prevents confusion later.
✨ Pro tip
Double-check your top 3 suppliers' VAT calculations every quarter - even a 2% error on high-volume ingredients can cost €400+ monthly. Set a calendar reminder for this 15-minute review.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
Was this article helpful?
Frequently asked questions
Why do I need to calculate with prices excluding VAT?
For food cost calculation you always use excluding VAT, because you also calculate your selling price excluding VAT. VAT is passed through and doesn't belong in your actual costs.
What if I don't know whether a price is inclusive or exclusive VAT?
Check your invoice - it always states whether VAT is included. If in doubt: call your supplier. Most hospitality suppliers provide prices including VAT.
Does 9% VAT apply to all food items?
Yes, 9% VAT applies to all food items. Only alcoholic beverages have 21% VAT. Equipment and cleaning supplies also fall under 21%.
What happens if I calculate VAT incorrectly?
Then your food cost appears lower than it actually is. You think dishes are profitable when you're actually running at a loss. This can cost you hundreds of euros per month.
📚 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.
Optimize your purchasing with data
Know exactly which supplier is most cost-effective and how price changes affect your margins. KitchenNmbrs links purchasing directly to recipe costs. Try it free for 14 days.
Start free trial →