Adding VAT and Taking It Back Out
Value added tax is charged as a percentage of the net price, which makes adding it straightforward and removing it counterintuitive. Taking 20% off a gross price does not give you the net figure, because the 20% was calculated on the smaller number in the first place.
This calculator works in both directions, net to gross and gross to net, and shows the tax amount separately, which is the figure an invoice has to state.
How to Calculate VAT
The direction matters more than the arithmetic, and it is where the common error sits.
- Choose whether your figure is net (before tax) or gross (including tax).
- Enter the amount and the VAT rate that applies. Rates differ by country and by product category within a country.
- Read the three figures: net, tax and gross. An invoice normally has to show all three separately rather than just the total.
- To go from gross to net, note that the calculator divides rather than subtracting a percentage, that is the step people get wrong by hand.
- Check the rate against the category, since reduced and zero rates apply to specific goods such as food, books and children’s clothing in many countries.
Why You Divide Rather Than Subtract
At a 20% rate, a net price of 100 becomes a gross price of 120. To recover the net from the gross, you divide 120 by 1.2, which returns 100. Subtracting 20% of 120 gives 96, which is wrong by four, a four per cent error that grows with the amount and quietly misstates the tax on every line.
The tax itself is the difference between the two, so at 20% the VAT contained in a gross figure is one sixth of it, not one fifth. The equivalent fractions are worth knowing: a 20% rate means gross ÷ 6, a 10% rate means gross ÷ 11, and a 5% rate means gross ÷ 21.
Standard VAT and Sales Tax Rates
Headline rates in several countries. Reduced rates apply to specific categories almost everywhere.
| Country | Standard rate | Reduced rates | Name |
|---|---|---|---|
| United Kingdom | 20% | 5%, 0% | VAT |
| Ireland | 23% | 13.5%, 9%, 0% | VAT |
| Germany | 19% | 7% | Mehrwertsteuer |
| France | 20% | 10%, 5.5%, 2.1% | TVA |
| Spain | 21% | 10%, 4% | IVA |
| South Korea | 10% | 0% on exports | Value added tax |
| Australia | 10% | 0% on basic food | GST |
| New Zealand | 15% | 0% on exports | GST |
| Singapore | 9% | 0% on exports | GST |
Rates change, and this table is a starting point rather than an authority. The United States is the notable absence: it has no VAT, only state and local sales taxes that are added at the till rather than included in the displayed price.
Where the Displayed Price Comes From
In most VAT countries, consumer prices are shown gross, the price on the shelf is what you pay. Business-to-business prices are usually quoted net, because a VAT-registered buyer reclaims the tax and treats it as a pass-through rather than a cost. Confusing the two conventions is a common cause of a quote coming in twenty per cent above what the customer expected.
This calculator handles the arithmetic and nothing else. Which rate applies to a given product, when registration becomes compulsory, how cross-border supplies are treated and what an invoice must contain are all rules that vary by jurisdiction. For anything with a filing consequence, the tax authority’s own guidance or an accountant is the right source.