VAT Calculator

What Is VAT?

VAT, or Value Added Tax, is a consumption tax charged on most goods and services. What makes it different from a simple sales tax is that it is collected in stages along the supply chain. A manufacturer charges VAT to a wholesaler, the wholesaler charges VAT to a retailer, and the retailer charges VAT to the final customer. At each stage the business hands over the VAT it collected but reclaims the VAT it paid on its own purchases, so the tax it actually remits is only on the value it added. The full burden ultimately lands on the end consumer, but the tax is gathered piece by piece along the way. More than 170 countries operate a VAT or an equivalent goods and services tax (GST), which is why understanding it matters whether you run a shop in Lagos, freelance from London, or sell across borders.

How to Add and Remove VAT

Adding VAT is the simpler direction. You take the net (pre-tax) price, multiply it by the rate, and add the result on top. At Nigeria's 7.5% rate, a net price of 100,000 carries VAT of 7,500 and a gross price of 107,500. At the UK's 20% rate, a net price of 100 becomes a gross price of 120. In short, gross = net × (1 + rate).

Removing VAT trips a lot of people up. If a price already includes 20% VAT, you cannot simply subtract 20% of that figure, because the VAT was calculated on the smaller net amount, not on the gross. Instead you divide the gross by 1 plus the rate. A VAT-inclusive price of 120 at 20% gives a net of 120 ÷ 1.20 = 100, so the VAT is 20, not 24. This matters when you need to record the net revenue on an invoice or work out how much VAT you owe on takings. The formulas the calculator uses are shown below.

Once you have the net figure, dropping it onto a professional invoice is easy with our free invoice generator, which lays out the net, the VAT line, and the total the way a compliant invoice should.

VAT Rates Around the World

Standard VAT rates vary widely by country. Nigeria sits at the low end with a 7.5% standard rate, raised from 5% in 2020. The United Kingdom applies 20%, with a 5% reduced rate on things like domestic energy and a 0% rate on most food, books, and children's clothing. Ireland is one of the higher-rated countries at 23%. Across the European Union, standard rates cluster between 19% and 27%: Germany charges 19%, France and much of the bloc sit around 20% to 22%, while Hungary tops the table at 27%. Elsewhere, South Africa charges 15%, Kenya 16%, and the Gulf states came late to VAT, with the UAE and Saudi Arabia introducing it in 2018 at 5% (Saudi Arabia later tripled its rate to 15%).

Many countries call the same tax by a different name. India, Australia, Singapore, and Canada all run a Goods and Services Tax (GST) that works on the same input-output principle as VAT. The country presets in this calculator fill the standard headline rate, but almost every system layers on reduced rates, zero rates, and exemptions for specific categories. Treat the presets as a fast starting point, and always confirm the exact rate for your product with the local tax authority before you file.

VAT for Small Businesses and When to Register

For a small business, VAT is less about the arithmetic and more about the paperwork. Most countries set a registration threshold based on your taxable turnover over a rolling period. Once your sales cross that line, registration is mandatory: you must charge VAT on what you sell (your output tax), can reclaim VAT on what you buy (your input tax), and file periodic returns paying over the difference. The UK threshold is currently £90,000 in a rolling twelve months, while Nigeria expects businesses making VAT-able supplies to register with the FIRS and file monthly.

Staying below the threshold can be a deliberate choice for businesses that sell mainly to consumers, since not charging VAT keeps prices lower. But if most of your customers are other VAT-registered businesses, voluntary registration can pay off because you recover the VAT on your own costs. The real challenge is record-keeping: you need a running tally of the VAT you have collected and the VAT you have paid so that filing is a summary rather than a scramble. Pairing this calculator with an income tax estimate gives you a fuller picture of what you will owe across VAT and income tax before the deadline arrives.

VAT vs Sales Tax

VAT and US-style sales tax are often confused because a shopper pays a similar-looking markup at the till, but the two work very differently. Sales tax is a single-stage tax charged only at the final retail sale to a consumer; businesses buying goods to resell generally pay no sales tax on those purchases. VAT is a multi-stage tax collected at every step, with each business reclaiming the tax on its inputs. The practical upshot is that VAT builds an audit trail through every invoice in the chain, which makes it harder to evade but heavier on administration. Sales tax is simpler for the seller but can cascade or create loopholes at the border.

If you sell into the United States, VAT rules do not apply and you will want our sales tax calculator with its state-rate presets instead. If you operate in a VAT or GST country, this VAT calculator is the right tool, and the two share the same clean add-and-reverse layout so switching between them feels familiar.