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VAT (value added tax) is a percentage added to the selling price of goods and services in many countries. A price without VAT is called the net price, and a price with VAT is called the gross price. Going from net to gross is easy. Going back from gross to net is where most mistakes happen.
Adding VAT to a net price
Multiply the net price by 1 plus the rate written as a decimal. A rate of 20% becomes 1.20. The VAT amount is the gross price minus the net price.
- 1Start with the net price1,000 before VAT.
- 2Work out the multiplier1 + 20 ÷ 100 = **1.20**.
- 3Multiply1,000 × 1.20 = **1,200** gross.
- 4Find the VAT1,200 − 1,000 = **200** of VAT.
The same steps work for any rate. Swap 1.20 for 1.05, 1.19 or 1.25 as needed.
Removing VAT from a gross price
Divide the gross price by the same multiplier. This undoes the multiplication exactly. It is tempting to take 20% off, but 20% of the gross price is more than the VAT that was added, because the gross price is already bigger than the net one.
- 1,200 × 0.80 = 960
- Removes too much (240 instead of 200)
- The net price comes out 40 too low
- 1,200 ÷ 1.20 = 1,000
- Removes exactly 200 of VAT
- Matches the original net price
The gross price includes VAT on the net price. Dividing reverses that step. Subtracting a percentage of the gross does not.
How much VAT is hidden inside a gross price?
The VAT share of a gross price is rate ÷ (100 + rate). At 20% that is 20 ÷ 120, or one sixth. At 25% it is one fifth, and at 10% it is one eleventh. This is handy when you want to guess the VAT on a receipt in your head: divide the total by 6 for a 20% rate.
| VAT rate | Add VAT | Remove VAT | VAT share of gross | VAT inside a gross price of 1,000 |
|---|---|---|---|---|
| 5% | × 1.05 | ÷ 1.05 | 4.76% | 47.62 |
| 10% | × 1.10 | ÷ 1.10 | 9.09% | 90.91 |
| 15% | × 1.15 | ÷ 1.15 | 13.04% | 130.43 |
| 19% | × 1.19 | ÷ 1.19 | 15.97% | 159.66 |
| 20% | × 1.20 | ÷ 1.20 | 16.67% | 166.67 |
| 21% | × 1.21 | ÷ 1.21 | 17.36% | 173.55 |
| 23% | × 1.23 | ÷ 1.23 | 18.70% | 186.99 |
| 25% | × 1.25 | ÷ 1.25 | 20.00% | 200 |
The share of gross is always smaller than the rate itself. A 25% VAT means one fifth of the final price, not one quarter.
Doubling the rate from 10% to 20% does not double the VAT inside a gross price: 90.91 becomes 166.67, which is about 1.8 times as much.
Where the VAT goes at each stage
VAT is charged at every step in a supply chain, but each business gets back the VAT it paid on its own purchases. Only the value it adds is taxed. In the end the total VAT collected equals the rate applied to the final price, and the consumer is the one who really bears it.
- 1Sawmill sells wood for 100 netCharges **20** VAT and pays the whole 20 to the tax office.
- 2Carpenter sells a table for 300 netCharges **60** VAT, claims back the 20 paid, and pays **40**.
- 3Shop sells it for 500 netCharges **100** VAT, claims back the 60 paid, and pays **40**.
- 4The customer pays 600500 plus **100** VAT. The tax office has received 20 + 40 + 40 = **100** in total.
The total VAT collected, 100, is exactly 20% of the final net price of 500. Businesses only pay the tax on the extra value they add.
Standard rates in a few countries
Rates change, and most countries also have reduced rates for some goods, so always check the current figure with your tax authority. These standard rates give a feel for the range.
| Country | Standard rate (approximate) |
|---|---|
| United Kingdom | 20% |
| Germany | 19% |
| France | 20% |
| Spain | 21% |
| Sweden | 25% |
Standard rates only. Reduced and zero rates exist for food, books, medicine and other categories in many countries. Confirm the current rate before you file a return.
Rounding on invoices
Round the VAT to the smallest currency unit, usually two decimals. On an invoice with many lines you can either calculate VAT per line and add them up, or add the net amounts first and calculate VAT once. The totals may differ by a few cents. Follow the rule of your tax authority or accounting software and use the same method every time.
A checklist for VAT calculations
- Decide the direction. Do you have a net price (add VAT) or a gross price (remove VAT)?
- Use the right rate. Look up the rate for that item and date, not just the standard rate.
- Add by multiplying, remove by dividing. Never subtract a percentage of a gross price.
- Keep the net and VAT separate on invoices and records.
- Round at the end, following your local rule, and keep the same method for every invoice.
Questions people ask
How do I add VAT to a price?
Multiply the net price by 1 plus the rate as a decimal. For 20% VAT, multiply by 1.20. A net price of 1,000 becomes 1,200 and the VAT is 200.
How do I remove VAT from a price?
Divide the gross price by 1 plus the rate as a decimal. For 20% VAT, divide by 1.20. A gross price of 1,200 gives a net price of 1,000 and VAT of 200.
Why can I not just subtract 20% from a VAT-inclusive price?
Because the VAT was added to the net price, so it is 20% of the smaller number. Twenty percent of the gross price is larger than the VAT that was added, and the result comes out too low.
How do I find the VAT inside a gross price quickly?
Use rate ÷ (100 + rate). At 20% that is one sixth of the gross price. At 10% it is one eleventh, and at 25% it is one fifth.
What is the difference between net price and gross price?
The net price is the price before VAT. The gross price is the price including VAT. Invoices usually show the net amount, the VAT and the gross total on separate lines.
Does the VAT Calculator work for any country or currency?
Yes. The VAT Calculator works with plain numbers, so you can use it for any currency and any VAT, GST or similar rate. Enter the rate that applies to your item.