VAT Calculator

This VAT calculator fills in whatever you leave blank. Enter any two of the four values, the rate, the net price, the gross price, or the tax amount, and it works out the rest. The example loaded on this page takes a net price of 1,200 at a 20% rate and returns 240 of tax and a gross price of 1,440. Enter the gross price instead and it runs the sum backwards, which is the calculation most people get wrong by hand.

What VAT is

VAT, or value-added tax, is a consumption tax collected in pieces at every stage of a supply chain rather than once at the till. Each business in the chain charges tax on what it sells, reclaims the tax it paid on what it bought, and sends the difference to the government. The tax therefore lands on the value that business added, and the full amount is carried by the final consumer.

It is the most widely used consumption tax in the world, operating in around 175 countries and raising roughly a fifth of all tax revenue globally. The United States is the only large developed economy without one, relying instead on state and local sales taxes. Every EU member state is required to run a VAT with a standard rate of at least 15%, and rates across the bloc have drifted upward since the system was introduced.

The two formulas, and the mistake to avoid

Adding VAT is simple multiplication. Removing it is division, and that is where errors creep in.

Gross price = net price × (1 + rate ÷ 100)

Net price = gross price ÷ (1 + rate ÷ 100)

The common error is subtracting the rate from the gross price. Take 20% off 1,440 and you get 1,152, which is wrong. Divide 1,440 by 1.2 and you get the correct net price of 1,200. The gap is 48, and on a year of invoices that adds up fast.

A shortcut worth memorising: at a 20% rate the tax is exactly one sixth of the gross price, so 1,440 divided by 6 is 240. At 25% it is one fifth. At any other rate the tax inside a gross figure is gross × rate ÷ (100 + rate), so at 19% it is gross × 19 ÷ 119. If you want the same arithmetic on a US-style tax, the Sales Tax Calculator does it, and the Percentage Calculator handles the general case.

How the tax moves through a supply chain

Follow a wooden chair at a 20% rate. A sawmill sells timber to a workshop for 100 plus 20 of VAT, and sends that 20 to the government. The workshop builds the chair and sells it to a shop for 300 plus 60 of VAT. It has collected 60 and already paid 20, so it remits 40. The shop sells the chair to a customer for 500 plus 100 of VAT, has collected 100 and paid 60, and remits 40.

The government ends up with 20 plus 40 plus 40, which is 100, exactly the 20% charged on the final 500 price. Nobody in the middle carried the tax, because each one reclaimed what they paid. That reclaim mechanism is why VAT does not stack up on itself the way a poorly designed turnover tax does.

VAT against sales tax

Sales tax is collected once, by the last seller in the chain, from the final consumer. The businesses upstream buy tax free using a resale certificate. VAT is collected at every step and refunded at every step. Both are designed to fall on consumption; they differ in where the paperwork sits.

VAT is harder to evade, because every claim for a refund has to be matched against an invoice somebody else declared, which creates a paper trail across the whole chain. If a retailer selling under a sales tax system hides a sale, the entire tax on that item disappears; under VAT, only the last slice does, since the earlier stages were already collected. The cost of that reliability is administration. VAT means registration, invoices in a prescribed format, periodic returns, and record keeping for every business in the chain, right back to the raw material.

Rates differ noticeably too. US sales taxes usually land between 4% and 10% combined, while standard VAT rates run from 17% to 27%. That does not mean VAT countries tax businesses harder and consumers less. Businesses set prices to recover whatever they remit, so the money comes from the same place either way.

Zero-rated is not the same as exempt

Two categories look identical on a receipt and behave completely differently for a business, and this catches out most people registering for the first time.

• Zero-rated: the sale is taxable at 0%, and the seller can still reclaim the VAT paid on its own costs. In the UK this covers most food, children's clothing, books, and newspapers.
• Exempt: no VAT is charged and none of the VAT on related costs can be reclaimed. Financial services, insurance, most education, and health care usually fall here.

A business selling zero-rated goods often receives money back from the tax authority each quarter. A business making exempt supplies absorbs the VAT on its own purchases as a plain cost. The customer sees 0 on both invoices and never knows the difference.

Rates around the world

Standard rates vary widely, and nearly every country runs reduced rates alongside them for essentials:

• United Kingdom: 20% standard, 5% reduced on domestic energy and some renovations, 0% on food and children's clothing.
• European Union: a legal minimum standard rate of 15%. In practice Luxembourg is lowest at 17% and Hungary highest at 27%, with Germany at 19%, France at 20%, Spain at 21%, Italy at 22%, and Denmark and Sweden at 25%.
• Switzerland: 8.1% since 2024, among the lowest in Europe.
• Canada: 5% federal GST, combined with provincial tax into an HST of up to 15% in some provinces.
• Australia and New Zealand: a 10% and a 15% GST respectively, both applied broadly with few exceptions.
• India: GST charged in bands, commonly 5%, 12%, 18%, and 28% depending on the category.
• Singapore: 9% GST since 2024, raised from 7% over two steps.

Country detail matters more than the headline. The Philippines exempts many purchases by senior citizens. China applies reduced rates to categories including books and certain fuels. Almost everywhere, some mix of food, medicine, education, and public transport is treated more gently than the standard rate.

GST, and the naming confusion

A goods and services tax is a VAT wearing a different label. Canada, Australia, India, New Zealand, and Singapore all call theirs GST, and the mechanics are the same: tax charged at each stage, input tax reclaimed, the consumer carrying the total. No country runs both a VAT and a GST. The names get used interchangeably with "sales tax" in everyday speech, which is where confusion starts, because a true sales tax works differently.

Registering, invoicing, and reclaiming

Most countries only require registration above a turnover threshold. The UK sits at £90,000 of taxable turnover in a rolling twelve months, while several EU countries set theirs far lower and a few require registration from the first sale. Below the threshold you can often register voluntarily, which is worth doing when your customers are businesses that reclaim anyway and you have input VAT to recover.

Once registered, three things follow. Your invoices must carry your VAT number, the rate, and the tax shown separately from the net amount. You file returns, usually quarterly or monthly, declaring output tax charged and input tax paid. And you keep the underlying records, because a refund claim without a valid invoice behind it will be denied on inspection.

Cross-border sales have their own rules. Business-to-business sales within the EU generally shift the liability to the buyer under the reverse charge, so the seller invoices without VAT. Sales of digital services to consumers are taxed at the customer's country rate, and the One Stop Shop lets a seller declare all of it through a single registration rather than one in every member state. Exports outside the bloc are typically zero-rated, with import VAT charged at the destination instead.

Who actually carries it

VAT is regressive as a share of income, because a household that spends everything it earns pays tax on all of it, while a household that saves half pays on half. Countries soften that in two ways: by zero-rating or reducing the rate on essentials, which is why food and children's clothing are treated separately in most systems, and by paying targeted rebates to lower-income households, as Canada does with its quarterly GST credit.

For a business, the tax should be neutral in principle, since what you collect you remit and what you pay you reclaim. In practice the cash flow is real: you often hand the tax over before your customer has paid the invoice. That timing, more than the rate, is what stings smaller firms. The Discount Calculator is useful alongside this one when you are working out whether a headline price includes tax before or after a markdown.

Reading the two charts

The donut splits the gross price into the net amount and the tax on top. At 20% the tax slice is 16.7% of the total rather than 20%, which surprises people every time, and it is the same arithmetic as the one sixth shortcut above: the rate is a percentage of the net price, while the slice is a percentage of the gross.

The bar chart holds your net price steady and applies each of eight real standard rates to it, from 0% up to the 25% used in Denmark and Sweden. It shows at a glance what the same product costs a customer in different markets, which is the calculation to run before quoting a price abroad.