VAT Calculator

About this VAT Calculator

The VAT Calculator supports two common tax calculations: adding a percentage tax to a net amount and extracting the tax component from a price that already includes it. Because tax rules vary by country and product, you choose the rate yourself.

Value Added Tax works differently from a simple US-style sales tax because it's typically already included in advertised prices in most VAT-using countries, so calculating VAT often means extracting the tax amount from a total rather than adding it to a subtotal.

For related tasks, try Number to Words Converter, Sales Tax Calculator or Discount Calculator.

How to use it

1. Enter the amount and tax rate.
2. Choose whether the amount is net or already tax-inclusive.
3. Calculate to see net, tax and gross values.

Practical example

For a net amount of 100 at a 20% rate, tax is 20 and gross is 120. If 120 is entered in extract mode at 20%, the tool returns a net amount of 100.

A product priced at 120 with VAT already included at a 20% rate has a VAT-exclusive (net) price of 100, since dividing the gross price by 1.20 removes the embedded tax, meaning the actual tax portion of that 120 price is exactly 20.

Things to double-check

VAT rates and rules vary significantly by country and even by product category within the same country, with many countries applying reduced VAT rates or exemptions to items like food or children's clothing, so always confirm the correct rate for your specific country and item type.

Adding and removing VAT

To add VAT, multiply the net price by one plus the rate. With a 20 percent rate, a net price of 200 has 40 of VAT and a gross price of 240. To remove VAT from a gross price, divide by one plus the rate: 240 divided by 1.2 is 200, and the VAT is the difference, 40. People often subtract 20 percent of 240, which is 48 and gives 192, but that is wrong because the VAT was calculated on the net amount, not the gross. Pick the operation that matches the figure you have.

Rates and categories

VAT or similar consumption taxes use different rates in different countries, and many places have a standard rate and one or more reduced rates for items such as food, books or transport. Some goods and services are exempt or zero-rated. The rate you must use depends on what is being sold and where, so check the current rate published by the tax authority instead of relying on memory. Rates change from time to time, which is another reason to confirm before you issue an invoice.

VAT for businesses

A VAT-registered business collects VAT on its sales, called output tax, and can usually reclaim VAT it paid on business purchases, called input tax. The difference is paid to the tax authority. If you charged 2,000 of VAT on sales and paid 1,200 on purchases, you would remit 800. Keep valid invoices showing the VAT amount, because they are the evidence for claiming input tax. The money you collect is not your profit, so set it aside until it is due.

Showing prices with and without VAT

Consumer prices in many countries are shown including VAT, while business-to-business prices are often quoted excluding it. Quote clearly which one you mean so customers are not surprised at the checkout. When you offer a discount, apply it to the net price and then add VAT, or apply it to the gross price; the result is the same as long as the rate is the same. Round only at the end to avoid small differences between invoices.

Invoices with more than one rate

Many countries have a standard rate and a reduced rate, so one invoice can contain both. If item A costs 100 net at 20 percent and item B costs 50 net at 5 percent, the VAT is 20 plus 2.50, which is 22.50, and the total is 172.50. Calculate each line at its own rate and add the results, instead of applying one rate to the whole total. On the invoice, show the net amount, the rate and the VAT for each line, so the customer and the tax authority can check it.

Worked example: a freelancer's invoice

A freelancer in a country with 20 percent VAT invoices a client 1,500 net. The VAT is 300 and the client pays 1,800. During the quarter the freelancer also bought a laptop for 720, including 120 of VAT. When the freelancer files the VAT return, the 300 collected minus the 120 paid on the laptop means 180 is due to the tax authority. If the client's invoice is paid late, the VAT may still be due on the date the invoice was issued under some schemes, so check which accounting method applies. Keep a copy of every invoice, since they are the evidence for both the VAT you charge and the VAT you reclaim.

Registration thresholds and special schemes

Most countries require a business to register for VAT once its taxable sales pass a threshold, which differs widely, and allow voluntary registration below it. Registration brings obligations to charge VAT, file returns and keep records, but also the right to reclaim VAT on business purchases. Some countries offer simplified schemes for small businesses, such as flat rates or cash-based accounting that ties VAT to when you are paid. The right choice depends on your costs, your customers and the paperwork you are willing to handle, so ask the tax authority or an accountant before you register.

Cross-border sales and reverse charge

VAT rules for international sales are complex. Exports of goods are often zero-rated, which means no VAT is charged but the seller can still reclaim input VAT. For business-to-business services across some borders, a reverse charge mechanism shifts the responsibility for VAT to the buyer, who accounts for it in their own return. Sales of digital services to consumers may be taxed in the country where the customer lives. Because the rules depend on the countries, the type of supply and the status of the customer, check the current guidance of the tax authorities involved before you invoice.

What a proper VAT invoice shows

A valid VAT invoice usually shows the supplier's name and address and VAT number, the customer's details, a unique invoice number, the date of supply, a description of the goods or services, the net amount, the VAT rate, the VAT amount and the total. If more than one rate applies, each line shows its own rate. Credit notes should refer to the original invoice. Mistakes, such as a missing number or the wrong rate, can prevent the customer from reclaiming VAT. Keep invoices for the period required by your local rules, which is often several years.

Key terms explained

The net price is the price without VAT, and the gross price includes it. Countries have a standard rate and may have reduced, zero and exempt categories. Output VAT is the VAT a business charges on its sales, and input VAT is the VAT it pays on purchases. Reverse charge moves the responsibility for VAT from the seller to the buyer in some cross-border sales. A VAT number identifies a registered business. The registration threshold is the turnover above which a business must register, and a credit note corrects an invoice.

Rules of thumb and quick checks

To find the VAT inside a gross price, multiply by the rate and divide by one plus the rate. At 20 percent, that is one sixth of the gross price, at 10 percent about 9.09 percent, at 15 percent about 13.04 percent and at 5 percent about 4.76 percent. To add VAT, multiply the net price by one plus the rate. Never subtract the rate from a gross price, because the VAT was calculated on the smaller net amount.

Read the full guide

Want the background, a step-by-step example and the common mistakes? Read Markup vs Margin: How to Price a Product and Protect Your Profit. Markup and margin are not the same. Learn both formulas, how to convert between them, how to price for a target margin and how discounts reduce profit.

Frequently asked questions