How to calculate VAT step by step

VAT is calculated from a taxable base using the rate that applies to the transaction. Confirm the country, date, product and tax treatment before using any rate.

Add VAT to a net price

VAT = net price x rate
gross price = net price x (1 + rate)

At 16%, a net price of 500 produces VAT of 80 and a total of 580.

Extract VAT from a tax-inclusive total

Do not subtract 16% directly. Divide by the tax multiplier:

net price = gross price / (1 + rate)
VAT = gross price - net price

For a total of 580 at 16%, 580 / 1.16 = 500; VAT is 80.

Round according to the invoicing and tax rules that apply, preferably after calculating from unrounded values. Zero-rated, exempt and out-of-scope transactions are legal classifications, not interchangeable mathematical labels.

Use the VAT calculator to add or extract tax, then verify the rate with the relevant tax authority.