To calculate VAT on an invoice, you need the net price, which is the amount before tax, and the VAT rate that applies. Rates depend on the country and sometimes on the product or service, so use the rate required by your local tax authority.
How to add VAT to a net price
If you have a price before VAT, calculate the tax first and then add it:
VAT = net price × rate / 100Total = net price + VAT
For example, with a net price of $1,000 and a 20% rate:
- VAT: 1,000 × 20 / 100 = $200.
- Invoice total: 1,000 + 200 = $1,200.
How to remove VAT from a total
When the total already includes VAT, do not subtract the percentage directly. The total contains both the net price and the tax, so recover the net amount first:
Net price = total / (1 + rate / 100)VAT = total − net price
With a VAT-inclusive total of $1,200 and a 20% rate, the net price is 1,200 / 1.20 = $1,000 and the VAT is $200. Directly subtracting 20% from $1,200 would give the wrong net amount.
What to show on the invoice
An invoice that charges VAT normally separates the net amount, the rate, the VAT amount and the total. If different items use different rates, calculate each group separately before adding the totals. Keep the original amounts and use a consistent rounding rule.
These formulas calculate percentages; they do not determine whether a sale is exempt or which legal rate applies. For EU rates, check the European Commission VAT rate information or your local tax authority.