Value-added tax (VAT) is charged in many countries at each stage of the supply chain, and business owners, freelancers, and shoppers regularly need to move between VAT-inclusive and VAT-exclusive prices. This calculator handles both directions.
Formulas
Adding 20% VAT to a $100 net price: $100 × 1.20 = $120. Removing 20% VAT from a $120 gross price: $120 ÷ 1.20 = $100 — note that you divide by 1.20, not simply subtract 20%, because the $120 already includes the tax.
Worked examples
| Amount | Rate | Mode | Result |
|---|---|---|---|
| $250.00 | 20% | Add VAT | $300.00 |
| $300.00 | 20% | Remove VAT | $250.00 (VAT: $50.00) |
| $80.00 | 5% | Add VAT | $84.00 |
For the fuller picture — including how businesses reclaim VAT and what "VAT inclusive" really means — see our companion article, How VAT Actually Works.
Common mistakes
- Subtracting the percentage directly from a gross price. $120 minus 20% is $96, not $100 — the correct net figure. Removing VAT requires division by (1 + rate), not straight subtraction.
- Using the wrong rate for the goods or service. VAT rates often vary by category (standard, reduced, zero-rated) — confirm the applicable rate for your country and product type.
Tips
- Keep net and gross figures clearly labeled on invoices to avoid confusion later.
- When comparing prices between VAT-inclusive and VAT-exclusive listings, always convert to the same basis first.
Frequently asked questions
How do I add VAT to a price?
Multiply the net price by 1 plus the VAT rate as a decimal. For a 20% rate, multiply by 1.20.
How do I remove VAT from a price?
Divide the gross price by 1 plus the VAT rate as a decimal, not by subtracting the percentage directly.
Why can't I just subtract the VAT percentage from the gross price?
Because the VAT percentage was originally calculated on the smaller net amount, not the larger gross amount, so subtracting it directly from the gross figure overstates the deduction.
What does "VAT inclusive" mean?
A "VAT inclusive" price already has VAT built into the displayed figure — it's the same as the gross price. A "VAT exclusive" price (the net price) has VAT added on top separately at checkout or on the invoice.
Can businesses reclaim VAT?
In many countries, VAT-registered businesses can reclaim the VAT they paid on eligible business purchases (input VAT) against the VAT they charge customers (output VAT) when filing a VAT return. Rules and eligibility vary significantly by country, so check with a local tax authority or accountant for your specific situation.
References
- European Commission — Taxation and Customs Union — Background on how VAT is applied across EU member states