VAT Explained

VAT (value added tax), also called sales tax or GST in some countries, is a tax added to the price of most goods and services. The rate varies by country, so this guide sticks to how VAT behaves rather than any one rate. Whatever your local rate, the maths is the same.

Inclusive vs exclusive prices

A price is exclusive of VAT (net) when the tax has not been added yet, and inclusive (gross) when it has. Businesses usually think in net prices; the shelf price you pay is the gross price. The difference between the two is the VAT itself.

How to add VAT

Multiply the net price by (1 + rate as a decimal). At a 14% rate, a net price of 100 becomes 100 x 1.14 = 114, with 14 of VAT.

How to remove VAT

Divide the gross price by that same figure. A gross price of 114 at 14% becomes 114 / 1.14 = 100 net, so the VAT portion is 14.

The mistake almost everyone makes

You cannot remove VAT by subtracting the percentage. Taking 14% off 114 gives 98.04, not 100, because the 14% was originally calculated on the smaller net figure, not the gross. To reverse VAT correctly, always divide, do not subtract. Our VAT Calculator does both directions for any rate.

VAT and discounts together

Apply the discount first, then work out VAT on the reduced price. A discount changes the net amount, and VAT follows whatever the net becomes. The Discount Calculator handles the first step.