VAT Calculator
Value added tax (VAT) calculator:
What is VAT?
VAT stands for "Value-Added Tax", which is intended to be a sales tax on the added value to a starting good or service, or a state of nature, and is determined as a percentage of the end price of goods and services paid by an end consumer. This is ensured through a somewhat complicated scheme in which each person or company adding value to a product is reimbursed for the tax, until it ends up being paid for by the end consumer (which can also be a judicial person). VAT is one of the primary sources for budget funds in many countries. As it is a tax on consumption, shared proportionally by all who consume, it is deemed unfair to people in a poorer economic situation by people who believe in equality of outcome.
Where it gets tricky is in the consistency of application of the tax in different countries that use it. VAT is mostly prevalent in Europe (and thus the EU), but it is adopted by other countries as well, even though in some places the name might be different.
For example, in some countries the valude-added tax (VAT) is applied universally at the same rate, with rates commonly between 15% and 25%. There might be certain industries or categories of products or services, which are excluded from VAT, for example educational services and institutions, books and schoolbooks, basic foods and/or drinks, transportation and so on. In some cases, it is an industry considered on some, usually arbitrary basis, to be key for the functioning of the whole economy, e.g. tourism in countries where it contributes a significant percentage of GDP. In many countries there are different VAT levels for different sets of products and services. For example, the official VAT rate might be 20%, but rate of VAT for books might be 5% while VAT for travel and accommodation services might be 10%. This is why having a VAT calculator handy can be quite useful.
VAT calculation formula
The formula for calculating VAT-inclusive prices used in this VAT calculator is easy as it is just a percent increase over the base price (gross amount, the amount excluding VAT). The equation is simply:
Price with VAT = Base Price x (100% + VAT(%))
For example, to increase a gross price of 100 euro with a tax of 15% we need to multiply €100 x (100% + 15%) = €100 x 115% = €115 net amount including VAT. This is equivalent mathematically to multiplying 100 euro by 1.15.
The formula for how much sales tax you need to add to a gross amount in any currency is:
VAT = Base Price x VAT(%)
So if the gross amount is €20 and the tax rate is 10%, the VAT is equal to €20 x 10% = €2. This is the same as multiplying 20 by 0.1 which another way to calculate VAT. The net amount is obviously just the gross amount plus the amount of sales tax, so €20 + €2 = €22.
An easy transformation of this formula means that to remove VAT from a net price, one needs to simply divide by 1 plus the rate of vat. I.e. with a tax rate of 20% (.2), just divide by 1.2 to remove VAT and get the gross amount. Our calculator can help you calculate VAT "backwards" by choosing the "Price without VAT" option which will exclude VAT from a VAT-inclusive price to give you the price ex. VAT.
VAT calculation examples
Example 1: If you know the price without VAT is €80 and the VAT rate is 20%, what is the net amount? There is no need to calculate VAT separately to get the net amount. Using the first equation above simply replace the values to get €80 x (100% + 20%) = €80 x 120% = €80 x 1.2 = €96 with sales tax included.
Example 2: If you know the VAT rate for the product you are buying is 20% and you know the gross amount is $50, what is the absolute value of the value-added tax? Using the second formula above we get $50 x 20% = $10 of sales tax as the VAT amount.
Example 3: If you know the net price for a good or service is €150 and the VAT rate is 20%, what is the amount that the merchant or service provider actually pockets? To get the price net of vat, reverse the first formula by substituting the base price with the final one and by using division instead of multiplication. The price without VAT is calculated as €150 / (100% + 20%) = €150 / 120% = €150 / 1.20 = €125 VAT exclusive.
VAT tax calculation
VAT amount = VAT Rate(%) × Net amount
Gross amount = Net amount + VAT amount = (100% + VAT Rate(%)) × Net amount
Example
Net amount = 100£
VAT Rate = 20%
VAT amount = 20%×100£ = 20£
Gross amount = (100%+20%)×100£ = 120£
