How to calculate VAT

VAT math is two formulas. Everything else is knowing which rate applies and which direction you are going. This guide covers both formulas, three worked examples, and the mistakes that cause the most corrections on real invoices.

The two formulas

Adding VAT to a net price (the price before tax):

gross = net x (1 + rate)

Removing VAT from a gross price (the price including tax):

net = gross / (1 + rate)

The rate goes in as a decimal. Twenty percent is 0.20, so the multiplier is 1.20. Nineteen percent is 0.19 and the multiplier is 1.19.

Worked examples

United Kingdom, 20%. You sell a service for 100.00 net:

• Gross = 100 x 1.20 = 120.00
• VAT = 120.00 minus 100.00 = 20.00

Germany, 19%. An invoice shows 119.00 gross. The net is:

• Net = 119 / 1.19 = 100.00
• VAT = 19.00

Switzerland, 8.1%. A quote for 500.00 net:

• Gross = 500 x 1.081 = 540.50
• VAT = 40.50

The mistakes that cost people money

Subtracting the percentage from the gross. Removing 20% from 120.00 gives 96.00, which is wrong. The correct net is 120 / 1.20 = 100.00, because the VAT is 20% of the net, not 20% of the gross.

Using the wrong rate. Food, books and transport often carry reduced rates. Germany's 7% food rate and the UK's 5% energy rate change the split completely. Always confirm which band your supply falls into.

Rounding too early. Round the final amount, not the intermediate steps. A supplier who rounds the net first and then adds VAT can drift by pennies on every line, which adds up across a year.

When VAT does not apply

Exports, most education, health care and financial services are exempt or zero rated in most countries. A zero rated supply still appears on the invoice at 0%, while an exempt supply is outside the system entirely. The difference affects how much input VAT you can reclaim.

Do the math in your browser

The VAT calculator applies both formulas with rates for 30+ countries, and the reverse VAT calculator handles the gross to net direction. Everything runs locally, so your numbers never leave your device.

Rates change. Confirm the applicable rate with your tax authority before filing, and check therates table, which we review quarterly.