Sage 50 US Edition does not have to ability to calculate tax on another tax. The closest you could get would be to manually calculate the NBT and enter it as a taxable line item on the invoice. Then you could use the sales tax functions to calculate the VAT. Or if the overall rate is always the same, you could make one tax rate that is 8.192%. I know that neither of those are great options but I don't think you have any other choices in Sage 50 US. You could check into Sage 50 Canadian Edition. It supports VAT so it might be able to do what you need.

If you need to pay VAT tax, the best solution is to move to the Sage 50 Canadian version (Formerly Simply Accounting)  I do sell that program and I would be happy to send you a quote.   Please feel free to reach me at  [email protected]. 

I am a Sage 50 Certified Consultant.  304-233-2612

Dear Stephen,

The solution worked I allocated the VAT% as 8.192%=((2.4%*8%)+8%) and NBT as 2.4% such that the total tax rate displays as 10.592%. As the tax rates don't fluctuate in Sri Lanka the solution would work. If the tax rates are changed it will be updated.

Thanks a lot