How VAT Calculation Works

What VAT is

VAT is a tax added to many goods and services. In everyday calculations, you usually need to add VAT to a net price or remove VAT from a gross price.

Add VAT

Total price = net price × (1 + VAT rate ÷ 100).

Example: 100 plus 20% VAT = 120.

Remove VAT

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

Example: 120 with 20% VAT included gives a net price of 100.

Common mistake

To remove 20% VAT from a gross price, do not simply subtract 20%. Use division by 1.20.

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