Value Added Tax (VAT) and sales tax are added to the price of most goods and services. Whether you're a business adding VAT to invoices or a consumer trying to understand what you actually pay, knowing how to calculate tax quickly is essential.
VAT is a consumption tax applied at each stage of production and sale. The final consumer pays the full accumulated VAT. Businesses collect it on behalf of the government and can usually reclaim VAT paid on their own purchases.
Adding VAT to an ex-VAT price
Removing VAT from an inc-VAT price
Adding VAT: $100 + 20% = $100 × 1.20 = $120
Removing VAT: $120 ÷ 1.20 = $100 (not $120 − 20% = $96 — common mistake!)
| Country | Standard VAT Rate |
|---|---|
| UK | 20% |
| Germany | 19% |
| France | 20% |
| Australia (GST) | 10% |
| Canada (GST) | 5% federal + provincial |
| USA | No federal VAT — state sales tax varies 0–10% |
| UAE | 5% |
| Saudi Arabia | 15% |
To remove VAT from an inclusive price, never just subtract the VAT percentage directly. If a price is $120 including 20% VAT, the VAT is NOT $24 (20% of $120). The correct VAT amount is $20 because the base price is $100, and 20% of $100 is $20.
Sales tax is only charged at the final point of sale. VAT is charged at every stage of production but businesses reclaim it, so the end result to the consumer is similar.
Yes — VAT-registered businesses can claim back VAT they've paid on business purchases, only paying the net difference to the government.