Use this online VAT calculator to easily calculate the price of an item or service with VAT included.
- What is VAT?
- VAT calculation formula
- VAT calculation examples
- VAT rates in Europe
- Is it a VAT-inclusive price?
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.
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? You can reverse the first formula by substituting the base price with the final one and by using division instead of multiplication. So the price without VAT is calculated as €150 / (100% + 20%) = €150 / 120% = €150 / 1.20 = €125.
VAT rates in Europe
It may be useful to know the VAT rates typical across Europe. A chart of the European countries ordered by their standard VAT rate is shown below for your reference.
The data is from Jul 2021, and while VAT rates rarely change, it is possible that these no longer apply at the time of reading. It should further be noted that some countries have exceptions for certain types of good or services, e.g. tourism services, alhoholic beverages, healthcare, education. For this reason you should always check the applicable tax rate from an official source at the moment of your purchase. Failure to do so may result in under or overestimating the tax amount and hence the final price.
Is it a VAT-inclusive price?
Before adding VAT to a price you need to check the sales tax has already been included in it. In many countries, e.g. in the European Union (EU), merchants and service providers are obliged to post the VAT-inclusive price on the product offer, be it in a physical or online store. Some merchants will put the price excluding VAT AND the VAT price, while others will list just the VAT-inclusive price. This will likely also be noted next to the price, with an asterisk next to it, in the footer of each page, or, in some cases, in the terms and conditions. If in doubt: always ask. The merchant in many cases is obliged to tell you the final amount you need to pay based on the applicable VAT percentage.
Where it gets more complicated is when both the provider and the consumer are VAT-registered entities. In this case, it is very common to exchange price information with value-added tax excluded, since the consumer entity will get reimbursed for the VAT tax, usually at the end of the month, so they only care about the gross amount. Still, cash flow might be an issue for larger purchases, so the net amount with VAT included should always be considered. Our calculator is especially useful in such cases.
Cite this calculator & page
If you'd like to cite this online calculator resource and information as provided on the page, you can use the following citation:
Georgiev G.Z., "VAT Calculator", [online] Available at: https://www.gigacalculator.com/calculators/vat-calculator.php URL [Accessed Date: 27 Sep, 2021].