VAT calculation: net, VAT and gross formulas

VAT is added to a net amount to obtain the gross price paid by the customer. The forward calculation is straightforward, but the reverse operation — recovering net from gross — is a common source of mistakes.

The Bethemesh VAT calculator can start from the net amount, VAT amount or gross amount and recalculates the other values instantly.

VAT calculation formulas

VAT = Net × VAT rate

Gross = Net + VAT

or:

Gross = Net × (1 + VAT rate)

For €100 net at 20%, VAT is €20 and gross is €120.

How to convert net to gross

Multiply net by the coefficient corresponding to the VAT rate. At 20%, use 1.20; at 10%, use 1.10.

How to recover net from gross

Do not subtract the VAT percentage directly from gross. Use:

Net = Gross / (1 + VAT rate)

So 120 / 1.20 = €100 net.

The VAT calculator performs this reverse calculation automatically.

VAT and commercial margin

Businesses generally analyse margin using net purchase and selling prices. Collected VAT is not commercial margin.

Use the margin calculator and read Margin calculation: margin rate, markup and selling price for the related business calculation.

Key point

To add VAT, multiply net by the VAT coefficient. To remove VAT already included in gross, divide by that coefficient. These operations are not symmetrical.