How to calculate VAT

The tax law has already undergone endless changes since 2020 began. Receipt obligations were introduced as one change. You can now see the voucher in more detail. Is it gross? Is it net? A 5% discount? A 20% discount? It’s actually quite easy! Here is how you can calculate your VAT, your gross price, and your net price in a few easy steps. Furthermore, you can use vat calculator online to calculate VAT.

How to Calculate VAT – Introduction

It is always our responsibility to pay the VAT at the time of purchase. It doesn’t matter if we’re buying a new TV or enjoying a quick lunch.

Taxes on consumption are called value added taxes (VAT). Consumers pay it, as its name suggests. The consumer, however, is who? It is usually the end user who is the consumer. For the purpose of this article, we will use the UK as an example and look at the tax rates on invoices and vat removal formula there.

If you go shopping at the supermarket and pay € 1.20 for a beer, you also have to pay taxes of € 0.20 on the beer. The supermarket pays the tax office € 0,20 for the money. Despite receiving € 1,00, the supermarket keeps it. The net price is shown here. The gross price is what you pay as a consumer. € 1,20 is the price.

Calculate 20% VAT and 5% VAT

It is now time to calculate the VAT included in the price.

The UK has 3 VAT rates, the standard rate is 20%, which applies to most products, the reduced rate is 5%, and the 0% rate is 0%.

Visiting a hairdresser is a service subject to 20% tax. The hairdresser expects to be paid € 15,00 for his services. The amount is net. Upon satisfaction with his work, you pay his bill. After that, you will be charged €18. The hairdresser’s target price is 120% of this amount. Only € 3 must be paid to the tax office by the hairdresser, and he can keep the remaining €15,000.

The gross amount is calculated by multiplying the net amount by 1.20. In order to determine how much VAT is included in the amount, divide the gross amount by 1.20 to get the net amount x 0.20. In this case, VAT is included in the gross amount.

Purchasing fruit at the supermarket is now your task. Reduced VAT rates of 5% apply to fruit. Foodstuffs with a reduced VAT rate of 5% are eligible for this reduction.

Caviar and lobster, for example, are exceptions. There is a great offer at the supermarket right now. For € 1.00 you get a banana and an apple. Immediately strike the receipt and look at it. Didn’t we have 20% VAT? That’s not exactly true, since food is usually exempt from tax.

However, supermarkets are not allowed to keep everything. This is the gross price of € 1,00. Once you have calculated € 1.00 / 1.05, you will have € 0.95. That is the net price. You now need to multiply € 0.95 by 0.05. This results in € 0.05 (rounded up). You can calculate the included VAT based on the gross price. In addition, € 0.95 will be withheld from the supermarket’s revenues. The supermarket must now pay this € 0.05 to the tax office.

When do I have to calculate VAT?

Your old record collection needs to be sold, and you know you will have to charge 20% VAT. You can only take advantage of this if you are an entrepreneur. In the case of one-time sales on ebay, you are not required to charge VAT if you are not a regular eBay seller.

Entrepreneurs have one exception, however: small businesses. When using the small business regulation, they do not show VAT on their invoices even though they are entrepreneurs. Although not all EU countries have such tax regulations, there are a few that do, so you should check with the country you are selling in to see if it is possible.


You should now be able to understand your receipt better. In other words, the net price is what the entrepreneur would pay for the product. The gross price is what you pay as a consumer. Taxes are usually charged at a rate of 20%. The product is exempt from VAT except for a reduced rate. A 5% tax rate is then applied.

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