Net, gross, and rate
The net price is the amount before tax. The gross price is what the customer actually pays. VAT is the difference, set by a percentage rate. That rate is not universal: VAT rates and the categories they apply to vary by country and sometimes by product, so always use the rate that applies where you sell.
Adding VAT to a net price
Multiply the net amount by the rate and add it back. Using a 20% rate as an example only:
- VAT amount = net × rate. So 100 × 0.20 = 20.
- Gross = net + VAT. So 100 + 20 = 120.
A shortcut: net × 1.20 = 120 gives the gross directly.
Extracting VAT from a gross price
When a price already includes VAT, you divide rather than multiply. With a 20% rate, the gross represents 120% of the net, so:
- Net = gross ÷ 1.20. So 120 ÷ 1.20 = 100.
- VAT amount = gross − net. So 120 − 100 = 20.
For any rate r, use "1 + r" as the divisor: at 15% you divide by 1.15, at 5% by 1.05.
Do it faster
If you would rather not do the arithmetic, try the free VAT calculator at /tools/vat-calculator to add or extract VAT in one step. And when you invoice with Invoice Max Pro, VAT is applied to each line automatically, so totals always match your rate.