How to Add and Remove VAT: Formulas and Examples for the UK, Germany, France, Italy and Spain
Value-added tax, VAT, appears on invoices and receipts in more than 160 countries. The arithmetic is simple, yet a surprising number of people subtract it the wrong way and end up with an invoice that is a few euros or pounds out. This guide explains how VAT works, gives the formulas for adding and removing it, lists the main rates in five European countries, and shows how it differs from the sales tax used in the United States.
What VAT is, in one paragraph
VAT is a tax on consumption collected in stages. Each business in a supply chain charges VAT on what it sells and reclaims the VAT it paid on what it bought, so the tax effectively lands on the final consumer. For a VAT-registered business, the amount owed to the tax authority is output VAT (charged on sales) minus input VAT (paid on purchases). Consumers just see a price that includes VAT, or in some countries, a price shown without it.
The three numbers on every invoice
- Net: the price before VAT.
- VAT: the tax amount.
- Gross: the total including VAT, which is what the customer pays.
With a rate of r (as a decimal, so 20% is 0.20):
- Gross = Net × (1 + r)
- VAT = Net × r
- Net = Gross ÷ (1 + r)
- VAT = Gross − Net
Adding VAT to a net price
Example (UK, 20%): A service costs £250 net.
VAT = 250 × 0.20 = £50. Gross = 250 + 50 = £300. In one step: 250 × 1.20 = 300.
Removing VAT from a gross price
This is where mistakes happen. Example (UK, 20%): You paid £120 including VAT. How much was the VAT?
Do not take 20% of 120. That gives £24 and is wrong, because the 20% was charged on the net price, not on the total.
Divide by 1.20 instead: 120 ÷ 1.20 = £100 net. The VAT is 120 − 100 = £20.
A useful shortcut: at 20%, the VAT in a gross price is exactly one sixth of it (120 ÷ 6 = 20). For other rates, the VAT share of the gross price is r ÷ (1 + r): about 17.4% at 21%, 16.0% at 19%, and 18.0% at 22%.
Rates in five European countries
Rates change, so always confirm with the national tax authority. The standard and main reduced rates in these countries are currently:
| Country | Standard rate | Main reduced rates |
|---|---|---|
| United Kingdom | 20% | 5% (for example home energy), 0% (zero-rated items such as most food) |
| Germany | 19% | 7% |
| France | 20% | 10%, 5.5%, and 2.1% in specific cases |
| Italy | 22% | 10%, 5%, 4% |
| Spain | 21% | 10%, 4% |
Which rate applies depends on the product or service, not on the seller. Books, basic foods, public transport and some medicines are the usual candidates for lower rates.
Worked examples in other countries
Germany, 19%. A laptop is sold for €1,190 gross. Net = 1,190 ÷ 1.19 = €1,000; VAT = €190. Try your own figures in the German VAT calculator (in German).
France, 20%. A designer invoices €850 net. VAT = €170; gross = €1,020. The French VAT calculator (in French) shows all three numbers together.
Italy, 22%. A price of €610 includes IVA. Net = 610 ÷ 1.22 = €500; IVA = €110. Italians call removing it "scorporo", and the Italian VAT calculator (in Italian) is built for exactly this.
Spain, 21%. A restaurant meal at 10% reduced rate costs €55 including IVA. Net = 55 ÷ 1.10 = €50; IVA = €5. The same tool handles Spain and Mexico in the Spain and Mexico IVA calculator (in Spanish).
VAT is not the same as US sales tax
The United States has no national VAT. Instead, most states, and many cities and counties, charge a sales tax that is added at the checkout on top of the shelf price. Shelf prices in the US therefore exclude tax, while prices in most of Europe include it. Sales tax is charged only on the final sale to the consumer, and businesses generally do not reclaim it on their purchases.
The arithmetic is the same if you want to add or remove it: net × (1 + rate) or gross ÷ (1 + rate). The difference is where the tax is shown and who collects it at each stage.
Reduced, zero and exempt: not the same thing
- Reduced rate: VAT is charged, but at a lower percentage.
- Zero rate: VAT is charged at 0%. The seller can still reclaim the VAT paid on their costs.
- Exempt: no VAT is charged, but the seller usually cannot reclaim the VAT paid on their costs.
This distinction matters mostly to businesses doing their VAT returns, but it explains why a zero-rated invoice can still show a "VAT" line of zero.
Common VAT mistakes
- Subtracting the rate from the gross. Divide by 1 + rate instead.
- Using the wrong rate. A standard rate on a reduced-rate item inflates the price, and the reverse understates your tax liability.
- Rounding too early. Calculate on the unrounded figures and round only the final line. When an invoice has many lines, small rounding differences can add up.
- Forgetting that discounts come before VAT. If you give a 10% discount, apply it to the net price, then add VAT.
- Applying VAT where it does not apply. Some small businesses are below the registration threshold and do not charge VAT at all. Business-to-business sales across borders can also be subject to the "reverse charge", where the buyer accounts for the VAT.
A short checklist for invoices
An invoice generally needs a unique number, the date, the seller's and buyer's names and addresses, the seller's VAT number if registered, a description of the goods or services, the net amount, the VAT rate and amount, and the gross total. Requirements differ by country, so check the local rules.
Quick answers
Is VAT charged on shipping? Usually yes, at the same rate as the goods being delivered, though rules differ.
Can I reclaim VAT as a consumer? Normally no, except in specific cases such as certain tax-free shopping schemes for visitors.
Why does the VAT not always look like exactly 20%? Because it is 20% of the net price. Of the gross price it is one sixth, about 16.7%.
This article is general information, not tax advice. Rates, thresholds and rules change, so confirm with the tax authority or an accountant before you rely on a figure for a filing.