VAT (TVA) conversations become painful when people mix 3 things:
- net (VAT excluded)
- gross/total (net + VAT)
- whether VAT is included or added on top
This guide is practical on purpose: it’s here to reduce mistakes in offers, invoices, and negotiations for IT contractors. It’s not tax advice; for compliance or complex cases, confirm with an accountant.
TL;DR (save this)
- Put it in writing: “VAT included” or “VAT excluded”.
- Use the right tool for the right amount (don’t guess).
- Standard rate is 21%, reduced rate is 11% (verify which applies).
- “Extract VAT” is not
gross × 21%(you divide by1 + rate). - Decide rounding rules (per line vs total) to avoid small mismatches.
- Don’t assume the VAT rate or your VAT registration status—verify.
Mini-glossary (so you and the client mean the same thing)
- Net / VAT excluded: the base amount before VAT.
- Gross / VAT included: the final amount (net + VAT).
- Extract VAT: start from gross, compute net + VAT.
- Add VAT: start from net, compute VAT + gross.
Add VAT vs extract VAT (when you use each)
Two common tasks:
- Add VAT: base → total with VAT
- Extract VAT: total with VAT → base + VAT
In real workflows:
- The client gives a “VAT included” budget → you need to extract VAT to know the real base.
- You quote a net price → you need to add VAT to show the invoice total.
The sentence you must clarify
The question that prevents most problems is:
“Is this amount VAT included or VAT excluded?”
If you don’t clarify, you risk:
- underpricing by 21% (or by the wrong rate)
- invoice surprises
- losing trust over a wording ambiguity
Safer phrasing (copy/paste templates)
Use short, explicit wording:
- “Price: 10,000 RON + VAT (if applicable).”
- “Price: 12,100 RON VAT included.”
- “Rate: X EUR/hour net. VAT (if applicable) is added on the invoice.”
Worked scenarios (common contractor situations)
Scenario 1: client says “budget 1,210 RON VAT included”
Confirm in writing that 1,210 is gross (VAT included).
Then use Extract VAT (2026):
- Gross: 1,210
- VAT rate: 21%
- Result: net ≈ 1,000 and VAT ≈ 210
Why it matters: treating 1,210 as net changes the business deal completely.
Quick intuition: why extract is not gross × rate
When gross already includes VAT, VAT is a slice of the net base, not of the gross total. The practical shortcut is:
- net = gross / (1 + rate)
- VAT = gross − net
That’s why the extracted VAT is smaller than
gross × 21%.
Scenario 2: you quote “10,000 RON VAT excluded”
Use Add VAT (2026):
- Net: 10,000
- VAT 21%: 2,100
- Gross: 12,100
Practical tip: show both net and gross in the offer so procurement/accounting doesn’t “discover VAT” later.
Scenario 3: discounts and VAT (where mistakes happen)
Decide first: is the discount applied to net or gross?
- Discount on net: reduce net, then recalculate VAT.
- Discount on gross: reduce gross, then extract VAT to see the true base.
Scenario 4: client wants a hard “total cap”
Sometimes procurement insists on a maximum total (VAT included). In that case:
- Treat the cap as gross, 2) extract VAT to understand your net base, 3) decide if the net base is acceptable for your scope.
Rounding and invoices (those “few cents” that cause headaches)
When an invoice has multiple lines, rounding can differ between:
- per-line VAT rounding
- total VAT rounding
If you see small mismatches, check your invoicing tool settings.
Practical recommendation:
- If you use invoicing software, let it apply consistent rounding.
- If you do manual math, pick one rule and keep it consistent (especially when clients import into ERP).
Pre-send checklist (offer/invoice)
- Price is explicit: VAT included vs excluded.
- Currency is clear (RON/EUR) and you don’t mix currencies in one total.
- VAT rate is correct for your case.
- Rounding approach is consistent.
- If you use e-Factura validate the XML in the e-Factura XML validator.
FAQ
Is VAT always applied?
No. It depends on your VAT status and the transaction. If you’re unsure, confirm with your accountant.
What’s the most common contractor mistake?
Treating a “VAT included” price as “VAT excluded” (or the other way around), losing money or credibility.
Which tool should I use: overview, add, or extract?
- Overview to see both quickly.
- Extract when you have gross (VAT included).
- Add when you have net (VAT excluded).
How does VAT relate to PFA vs SRL?
VAT is separate from the legal form, but it affects cashflow and how you communicate pricing. See also PFA vs SRL (2026).
Next steps
To connect VAT with real workflows (not just theory), read Invoice vs proforma vs receipt (Romania) and RO e-Factura: practical guide.
Sources
- Law 141 (2025) (VAT rates): https://legislatie.just.ro/Public/DetaliiDocument/302804
- ANAF: https://www.anaf.ro/
