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How to calculate VAT 7% and service charge 10%
Wondering why the bill is higher than the menu prices? The answer is service charge and VAT. This guide explains the order and formula simply.
Where does 1.177 come from?
When 10% service charge is added first and 7% VAT is then applied to the service-inclusive amount, the multiplier is 1.10 × 1.07 = 1.177. A 1,000 THB food bill becomes 1,177 THB.
The increase is 17.7%, not 17%, because VAT also applies to the service charge in this calculation. Check the receipt: do not apply this multiplier again if the price already includes these charges, or if different rates apply.
Divide by 1.07 or 1.177 to work backwards?
To remove only 7% VAT, divide by 1.07: 1,177 ÷ 1.07 = 1,100 THB, which still includes the service charge.
To recover the food price before both 10% service charge and 7% VAT under the conditions above, divide by 1.177: 1,177 ÷ 1.177 = 1,000 THB.
Service charge vs VAT
Service charge is an extra fee the restaurant keeps, usually 10% of food — it is revenue, not a tax.
VAT is a government tax, 7% in Thailand. VAT-registered restaurants must collect and remit it.
When VAT is charged on the service-inclusive amount
For a receipt that charges VAT on the service-inclusive amount, add service charge first and then calculate VAT on that subtotal. Check the actual receipt before applying the formula.
Formula: total = (food + 10% service charge) × 1.07
- Food = menu prices ordered
- Service charge = food × 10%
- VAT base = food + service charge
- VAT = VAT base × 7%
- Total payable = VAT base + VAT
Worked example
Food 1,000 THB → 10% service charge = 100 → 1,100 THB.
7% VAT on 1,100 = 77 → total = 1,177 THB.
Split equally among 4 that is 294.25 each; if orders differ, distribute service charge and VAT proportionally.
Good to know
- Some menus already include VAT (net price) — look for 'price includes tax'.
- Non VAT-registered restaurants can only add service charge.
- Some items like alcohol may already include excise tax in the price.
Key takeaway
Remember service charge first, VAT second, and let HarnDuay distribute the tax proportionally for each person.
FAQ
Service charge or VAT first?
If the receipt charges VAT on the service-inclusive amount, add the service charge first and then calculate VAT on that subtotal.
Do menu prices include VAT?
It depends; if it says tax included, it does, otherwise it is usually added at the end.
How to split VAT fairly?
Distribute it proportionally to each person's food total — HarnDuay does this automatically.