How is VAT on products calculated?

Products sold in your webshop will (often) be subject to VAT, which you can set up yourself in your webshop settings. Most webshops display their prices inclusive of VAT, which is required for B2C sales. But how exactly is VAT calculated for your products?

Let's look at this example order:

Here, the prices for the two products plus shipping costs total €69.40. A VAT rate of 21% has been applied to the products and the shipping costs: 

€69.40 + 21% = €83.98.

Calculating from the order total (including VAT), we can see this matches the order subtotal (excluding VAT):

€83.98 / 1.21 = €69.40