Based on the comments by @starball, @jarmod and additional googling I found that you need to follow those steps:

Step 1. Install Python extension from marketplace: https://marketplace.visualstudio.com/items?itemName=ms-python.python

Step 2. Install one of the formatter packages for Python.

The Python extension supports source code formatting using either autopep8 (the default), black, or yapf.

from and More about it here: https://code.visualstudio.com/docs/python/editing#_formatting

Step 3. Select which code formatter you want to use in python.formatting.provider which is in settings>Extensions>Python (this maybe automatically set after step 1 and step 2). Also, in settings>Extensions>Python there are more options to select.

How to use formatting:

The code formatting is available in Visual Studio Code (VSCode) through the following shortcuts or key combinations:

On Windows Shift + Alt + F

On macOS Shift + Option + F

On Linux Ctrl + Shift + I

Format Selection (Ctrl+K Ctrl+F) - Format the selected text.

Or you can use right click menu:

from: https://mkyong.com/vscode/how-to-format-source-code-in-visual-studio-code-vscode/

and from: https://code.visualstudio.com/docs/editor/codebasics#_formatting

  "[python]": {
    "editor.codeActionsOnSave": {
      "source.fixAll": "explicit"
    },
    "editor.defaultFormatter": "charliermarsh.ruff",
    "editor.formatOnSave": true
  }

I use Ruff and those are the settings for python files. For me the editor.codeActionsOnSave did the trick.