Net, VAT, gross
VAT is charged on the net price and collected at each stage of the supply chain, with businesses reclaiming input VAT. To add 20% to a 100 net: VAT is 20, gross is 120. To extract it from a 120 gross: net is 100 — divide by 1.2, do not multiply by 0.8, which gives the wrong answer.
The extraction mistake
Subtracting 20% from a gross figure gives 96, not 100. The correct calculation is gross ÷ (1 + rate). It is the single most common VAT error in spreadsheets and price lists.
Rates worth memorising
- UK standard 20%, reduced 5%, zero-rated food and books
- Germany 19%, France 20%, Spain 21%, Italy 22%
- Netherlands 21%, Ireland 23%, Sweden 25%
- Digital services: charged where the customer is, not where you are
Cross-border selling
EU distance-selling thresholds and the One Stop Shop mean you may need to charge the destination country's rate. For a US seller shipping to the EU, VAT is usually collected by the marketplace or at import rather than by you.
Frequently Asked Questions
How do I remove VAT from a price?
Divide by (1 + rate): 120 ÷ 1.2 = 100 net at 20%.
Is VAT the same as sales tax?
Economically similar, structurally different — VAT is collected at each stage with input credits.
Which rate do I charge online?
The rate of the destination country for B2C digital and distance sales above the local threshold.
Assumptions & disclaimer
Results are estimates for planning. Fee schedules, tax brackets and deduction limits change; confirm current figures with the marketplace, the IRS or a qualified accountant before making decisions. Nothing here is financial, tax or legal advice.
Privacy & Your Data
BizCalcTool runs entirely in your browser. The figures you enter are never uploaded, stored or shared — there is no backend to send them to.