VAT-Inclusive vs. VAT-Exclusive Prices: How to Reverse the Calculation
October 21, 2026
To add VAT, multiply the net price by (1 + rate). To remove VAT from a gross price, divide by (1 + rate). At 20% VAT, a net price of €100 becomes €120 gross, and a gross price of €120 returns to €100 net with €20 of VAT. The common mistake is to subtract 20% of the gross price: €120 × 0.8 = €96, which is wrong.
Skip the math and get your answer instantly:
Open the VAT Calculator →The Three Formulas
Gross = Net × (1 + r). Net = Gross ÷ (1 + r). VAT amount = Gross − Net, or equivalently Gross × r ÷ (1 + r). For a 20% rate, the VAT share of the gross price is 20/120 = 1/6, or about 16.67%. For a 5% rate it is 5/105 = 4.76%.
VAT is charged on the net price, so the percentage taken from the gross price is smaller than the headline rate.
| Rate | Net to gross multiplier | Gross to net divisor | VAT as % of gross |
|---|---|---|---|
| 5% | 1.05 | 1.05 | 4.76% |
| 10% | 1.10 | 1.10 | 9.09% |
| 20% | 1.20 | 1.20 | 16.67% |
| 25% | 1.25 | 1.25 | 20.00% |
Worked Example
A shop shows a price of €59.99 including 20% VAT. Net = 59.99 ÷ 1.2 = €49.99. VAT = 59.99 − 49.99 = €10.00. Subtracting 20% instead would give €47.99, overstating VAT by €2.00 and understating the net price.
On an invoice of several lines, round at the end, or follow your tax authority's rules on rounding VAT per line or per invoice.
Why It Matters for Businesses
Businesses registered for VAT charge it on sales and reclaim it on purchases, so the amount they send to the tax authority is the difference. Errors in removing VAT from gross takings distort revenue figures and the VAT return.
Rates and rules differ between countries and goods. Check current rates, reduced-rate categories, and exemptions with your tax authority or adviser.
Frequently Asked Questions
How do I remove 20% VAT from a price?
Divide the gross price by 1.2.
How much of a gross price is VAT at 20%?
One sixth, or 16.67%.
Why can't I just subtract 20% of the gross price?
Because VAT was added on top of the net price, so the tax is 20% of the net, not 20% of the gross.
Is VAT the same as sales tax?
They are similar but VAT is collected at each stage of production, while US sales tax is charged once at final sale.