Calculating Value Added Tax (VAT) is a fundamental skill for anyone involved in commerce. Whether you're a business owner setting prices or a consumer trying to understand a receipt, knowing the formulas is crucial.

Adding VAT to a Net Amount

To find the gross amount (the price including VAT) from a net amount (the price before VAT), you multiply the net amount by 1 plus the VAT rate.

Formula: Gross Amount = Net Amount × (1 + VAT Rate)

Example: If the net price is $100 and the VAT rate is 20% (0.20), the calculation is: $100 × 1.20 = $120. The VAT amount is $20.

Removing VAT from a Gross Amount

To find the net amount from a gross amount, you divide the gross amount by 1 plus the VAT rate.

Formula: Net Amount = Gross Amount / (1 + VAT Rate)

Example: If the gross price is $120 and the VAT rate is 20% (0.20), the calculation is: $120 / 1.20 = $100. The VAT amount is $120 - $100 = $20.

Using a tool like our free VAT Calculator can automate these calculations, ensuring accuracy and saving time.