Understanding your VAT results
Representative standard VAT rates illustrate how much of a gross price is tax at common rates. National authorities publish current rates and category rules.
| Standard rate (examples) | VAT share of gross price |
|---|---|
| 5% | ≈ 4.8% of the gross amount |
| 15% (EU minimum standard rate) | ≈ 13.0% of the gross amount |
| 20% (UK, France) | ≈ 16.7% of the gross amount |
| 25% (Denmark, Sweden) | 20.0% of the gross amount |
- Rates and category rules (standard, reduced, zero, exempt) vary by country and change over time; the national tax authority's published schedule is authoritative.
- Exempt and zero-rated are different in VAT law: zero-rated sales charge 0% but allow input-VAT recovery, while exempt sales do not.
- VAT registration thresholds, invoicing rules and reclaim procedures are jurisdiction-specific; a qualified accountant or the tax authority should be consulted for business decisions.
What is VAT?
Value-added tax (VAT) is a consumption tax charged as a percentage of the price at each stage of production and distribution, with businesses reclaiming the VAT they paid on inputs so the tax ultimately falls on the final consumer. According to the OECD, more than 170 countries operate a VAT or equivalent goods-and-services tax; the United States is the notable exception, using state and local sales taxes instead.
Rates vary by country and by category of goods. The UK standard rate is 20%, with a 5% reduced rate for items such as domestic energy and a zero rate for most food and children's clothing (HMRC publishes the full schedules). EU member states set standard rates of at least 15% under the EU VAT Directive — examples include Germany at 19%, France at 20% and Ireland at 23% — alongside reduced rates for specific categories.
Two directions of calculation arise constantly in practice. Adding VAT converts a net (ex-VAT) price into the gross amount a consumer pays. Removing VAT — also called a reverse or backward VAT calculation — extracts the net amount and the tax from a VAT-inclusive price, which businesses need for invoices, expense claims and VAT returns. Because the tax was applied to the net amount, removal divides by (1 + rate); subtracting the rate percentage from the gross overstates the net.
How to use this VAT calculator
- Choose the direction: add VAT to a net amount, or remove VAT from a gross amount.
- Enter the amount — the net price when adding, the VAT-inclusive price when removing.
- Enter the VAT rate that applies (for example 20% UK standard, 5% UK reduced, or your country's rate).
- Read the gross amount, the VAT amount, and the net amount.
The VAT formulas
Adding VAT multiplies the net amount by the rate to get the tax, then adds it. Removing VAT divides the gross amount by (1 + rate) to recover the net; the VAT is the difference.
Worked example (add): a net price of $100 at 20% VAT carries $20 of tax, for a gross price of $120. Worked example (remove): a gross price of $120 at 20% contains a net of 120 ÷ 1.20 = $100 and $20 of VAT. Note that taking 20% off $120 would give $96 — wrong, because the 20% was charged on the net $100, not on the gross $120.
Common mistakes
- Removing VAT by subtracting the percentage from the gross — 20% off $120 gives $96, but the correct net is 120 ÷ 1.20 = $100.
- Applying the standard rate to goods that are reduced-rated, zero-rated or exempt in the relevant country.
- Confusing zero-rated with exempt; the input-VAT recovery consequences differ for businesses.
- Mixing net and gross prices in the same comparison or invoice line.
- Assuming rates are static; countries change VAT rates, and the rate at the tax point (supply date) applies.
よくある質問
How do I remove VAT from a price?
Divide the VAT-inclusive price by 1 plus the rate: net = gross ÷ (1 + rate). At 20% VAT, a gross price of $120 contains a net of 120 ÷ 1.20 = $100 and $20 of VAT. Subtracting 20% from the gross is incorrect because the tax was charged on the net amount, which is smaller than the gross.
How do I add VAT to a price?
Multiply the net price by the VAT rate to get the tax, and add it: gross = net × (1 + rate). A $250 net price at 20% VAT becomes 250 × 1.20 = $300, of which $50 is VAT. Equivalently, multiply by 1.05 for 5%, 1.20 for 20%, 1.25 for 25%.
What is the UK VAT rate?
The UK standard rate is 20%, applying to most goods and services. A reduced 5% rate covers items such as domestic fuel and power, and a 0% rate covers most food, books and children's clothing. Some supplies (such as insurance and education) are exempt rather than zero-rated. HMRC publishes the complete rate schedules and category rules.
What is the difference between VAT and sales tax?
VAT is collected in stages along the supply chain, with each business charging VAT on sales and reclaiming VAT on purchases, so the net revenue accrues gradually and the final consumer bears the tax. A retail sales tax, as used by US states, is charged only once at the final sale. Both are consumption taxes; the multi-stage credit mechanism is what defines VAT.
Why does dividing by 1.2 remove 20% VAT instead of multiplying by 0.8?
Because the 20% was applied to the net price, not the gross. If net × 1.20 = gross, then recovering the net requires gross ÷ 1.20. Multiplying the gross by 0.8 removes 20% of the gross, which is a larger amount than the VAT actually charged — on a $120 gross it would remove $24 instead of the correct $20.
参考文献
- HM Revenue & Customs (HMRC). VAT rates on different goods and services. gov.uk.
- OECD. Consumption Tax Trends — VAT/GST and excise rates, trends and administration issues. oecd.org.
- European Commission. VAT rules and rates in the EU (VAT Directive 2006/112/EC). ec.europa.eu.
- HM Revenue & Customs (HMRC). VAT guide (VAT Notice 700). gov.uk.