VAT Calculator
Sales Tax & VAT Calculator
Report Bug In more than 160 countries—including the UK, the European Union, and Turkey—Value Added Tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain. Unlike Sales Tax, which appears only at the register, VAT is often hidden inside the final price. The VAT Calculator is a dual-purpose tool: it helps businesses calculate the "Tax-Exclusive" price for invoices, and it helps consumers determine the "Tax-Inclusive" total for budgeting.
Whether you are a freelancer issuing a bill in London or a tourist shopping in Paris, accuracy in VAT calculation prevents financial discrepancies.
🧮 The Universal VAT Formulas
Calculating VAT requires two distinct mathematical approaches depending on your starting point (Net vs. Gross). Here is the logic used globally:
To REMOVE VAT: Net = Gross ÷ (1 + Rate)
Key Definitions:
- Net Price: The value of the goods before tax (Excl. VAT).
- Gross Price: The final amount paid by the consumer (Incl. VAT).
- Rate: The percentage expressed as a decimal (e.g., 20% = 0.20).
🇪🇺 Scenario: Pricing a Service (20% Standard Rate)
Let's simulate a standard business transaction involving a 20% VAT Rate (Common in the UK, France, and Turkey). The table below shows the clear split between the base cost and the government's share.
Business Insight: If you are a VAT-registered business, that €100 isn't your money. You are simply acting as an unpaid tax collector for the state. You must set it aside to pay during your quarterly VAT return.
Global VAT Dynamics
- Standard Rate: The rate applied to most goods/services (e.g., UK 20%, Germany 19%, Hungary 27%).
- Reduced Rate: Lower rates for essential items like energy, children's clothes, or food (e.g., 5% or 10%).
- Zero-Rated (0%): Items that are taxable but at 0%, meaning businesses can still reclaim input VAT on them (e.g., books, basic groceries in some countries).
- Exempt: Goods where no VAT is charged, and no input VAT can be reclaimed (e.g., financial services, insurance).
Frequently Asked Questions (FAQs)
What is the difference between VAT and Sales Tax?
VAT is collected at every stage of production (manufacturer -> wholesaler -> retailer). Sales Tax is only collected once at the very end, from the final consumer. VAT is considered less prone to evasion because of the "audit trail" created between businesses.
How do I remove VAT from a total price?
Many people make the mistake of simply subtracting the percentage (e.g., deducting 20% from €120). This is wrong. You must divide by 1.20.
Example: €120 / 1.20 = €100 (Net Price). The VAT portion was €20, which is 16.66% of the gross price, not 20%.
Who actually pays the VAT?
Technically, the final consumer pays the VAT. While businesses collect and remit the tax to the government, they can usually reclaim the VAT they paid on their own business expenses (Input VAT), making the tax neutral for them.
Can tourists get a VAT refund?
Yes. In many jurisdictions (like the EU), non-resident tourists can claim a "Tax-Free" refund on goods purchased for export. You typically need to spend a minimum amount and process a form at the airport customs before leaving.
What does "Reverse Charge" mean?
In B2B cross-border transactions (e.g., selling services from Germany to Spain), the Reverse Charge Mechanism shifts the responsibility of reporting VAT from the seller to the buyer. The invoice shows 0% VAT, but the buyer accounts for it in their own local tax return.
