VAT Calculator

Value Added Tax (VAT) is a consumption tax applied at each stage of the supply chain in over 170 countries worldwide. Unlike sales tax (applied only at the final sale), VAT is charged incrementally at every point where value is added. This calculator handles the two most common VAT operations: adding VAT to a net (pre-tax) amount and extracting VAT from a gross (tax-inclusive) amount.



Adding VAT is straightforward multiplication: Gross = Net × (1 + VAT Rate). For a net price of $100 with 20% VAT, the gross price is $100 × 1.20 = $120, where $20 is the VAT amount. This is the calculation businesses perform when creating invoices.



Removing VAT from a gross amount uses division: Net = Gross ÷ (1 + VAT Rate). For a gross price of $120 with 20% VAT, the net price is $120 ÷ 1.20 = $100. A common mistake is simply subtracting the percentage ($120 - 20% = $96), which is incorrect because VAT is calculated on the net amount, not the gross amount. The correct extraction formula accounts for this compounding.



The calculator supports custom VAT rates to accommodate different countries (EU standard rates range from 17% to 27%), reduced rates for essentials, and special rates for specific goods. All calculations use precise decimal arithmetic to avoid floating-point rounding errors that could compound across large invoices.

1. Business Invoicing
Freelancers, small businesses, and accountants calculating VAT on invoices need to convert between net and gross prices accurately. A single rounding error multiplied across hundreds of line items creates accounting discrepancies. This calculator ensures precision for every invoice.



2. Price Comparison Shopping
Consumers comparing prices across countries or retailers need to extract VAT to compare net costs. A product priced at €100 in Germany (19% VAT) has a net cost of €84.03, while the same €100 price in Hungary (27% VAT) has a net cost of €78.74. Understanding the tax component enables informed purchasing decisions.



3. International Business Planning
Companies selling across borders need to calculate final consumer prices in different VAT jurisdictions. Knowing how VAT affects pricing in each market is essential for competitive pricing strategies and profit margin calculations.



4. Expense Reporting & Tax Claims
Businesses reclaiming VAT on purchases need to extract the VAT component from receipts that show only gross amounts. The calculator quickly determines how much VAT is included in each expense for tax recovery submissions.



5. Retail Price Setting
Retailers deciding shelf prices work backward from desired margins: starting with cost, adding markup, then adding VAT to determine the consumer-facing price. The calculator streamlines this multi-step pricing process.

• Never subtract the percentage directly: To remove 20% VAT from $120, do NOT calculate $120 - 20% = $96. The correct formula is $120 ÷ 1.20 = $100. This is the most common VAT calculation error and leads to inaccurate bookkeeping.



• Use the correct country rate: VAT rates vary significantly — from 5% (Japan) to 27% (Hungary). Many countries also have reduced rates for food, books, and medicines. Always verify the applicable rate for your specific goods and jurisdiction.



• Round correctly for invoicing: Most tax authorities require VAT amounts rounded to 2 decimal places. Check your jurisdiction's rules — some round per line item, others round on the invoice total. The difference affects final amounts.



• Account for reverse charge mechanism: In B2B cross-border transactions within the EU, the buyer (not seller) accounts for VAT under the reverse charge mechanism. The invoice shows 0% VAT, but the buyer must self-assess.



• Keep records of all calculations: Tax authorities may audit VAT calculations. Document the rate used, the calculation method, and the date for each transaction.



• Check for VAT threshold exemptions: Many countries exempt small businesses below a revenue threshold from charging VAT. Verify whether you or your supplier are VAT-registered.