How to Calculate VAT: Ex-VAT & Inc-VAT Conversion Formulas and Rates
Value Added Tax (VAT) is a general consumption tax. Depending on accounting requirements, you can calculate the final price including tax from the net amount, or reverse-calculate the net price from the gross figure.
How to calculate VAT: Direct and reverse calculation formulas
Example for $100 net with a 20% tax rate: 100 × (1 + 0.20) = $120 gross. The tax component is $20.
Example for $120 gross with a 20% tax rate: 120 / 1.20 = $100 net. The included VAT is: Gross - Net = $20.
Comparative Chart of Official VAT Rates Applicable in 2026
Summary of standard, reduced, and super-reduced rates by covered country
| Country / Region | Standard Rate | Reduced Rate(s) | Exempt / Zero Rate | Key Application Examples |
|---|---|---|---|---|
| France | 20% | 10% and 5.5% | 2.1% super-reduced | 5.5% basic food & books, 10% restaurants & transit, 20% standard goods |
| Morocco | 20% | 10% and 14% | 7% utilities & sugar | 10% hotels & catering, 14% passenger transport, 20% commercial items |
| Belgium | 21% | 12% and 6% | 0% daily newspapers | 6% residential renovation > 10 yrs & groceries, 21% standard |
| Spain | 21% | 10% | 4% super-reduced | 4% staple foods (bread/milk/eggs), 10% restaurants, 21% standard |
| Canada | 5% GST | HST 13% to 15% / PST | 0% basic groceries | 13% in Ontario, 15% Atlantic provinces, 5% GST + 9.975% QST Quebec |
| Saudi Arabia | 15% ZATCA | 0% exports & medical | Exempt financial | Standard 15% with mandatory integrated Fatoora e-invoicing |
| United Arab Emirates | 5% FTA | 0% education & health | Exempt bare land | Standard 5% with mandatory registration threshold of AED 375,000 |
Understanding Output VAT vs. Input Deductible VAT for Businesses
For registered business entities, VAT is cash-flow neutral: the business charges VAT to its end clients (Output VAT) and deducts the tax incurred on commercial purchases (Input VAT). The net difference is settled periodically with the fiscal authority.
Frequently Asked Questions (FAQ) about VAT
Why is the VAT amount not simply 20% of the gross price?
This is the single most common bookkeeping mistake! The VAT percentage is always assessed on the net pre-tax base, never on the gross total. On a $120 gross purchase at 20% VAT, the tax is $20 (which is 16.67% of the gross) rather than $24.
How do sales taxes work in Canada (GST, QST, HST)?
In Canada, sales taxation combines the 5% federal Goods and Services Tax (GST) with provincial levies. Several provinces use a single Harmonized Sales Tax (HST between 13% and 15%), while Quebec levies QST (9.975%) alongside federal GST.
What mandatory VAT details must appear on a valid commercial invoice?
A compliant tax invoice must clearly display the net unit price of each line item, the applicable VAT rate, total VAT segregated by rate bracket, total gross amount, and the issuer's statutory tax identification or intra-community VAT number.
How do you quickly isolate the VAT portion from a gross Inc-VAT price?
For a 20% VAT rate, simply divide the gross Inc-VAT price by 6 (or multiply by 0.166667). For example, on a $120 total: 120 / 6 = $20 VAT, meaning the net Ex-VAT amount is $100. For a 10% rate, divide by 11.
What is the B2B VAT Reverse Charge mechanism?
The reverse charge mechanism applies to cross-border B2B trade. The supplier issues an invoice without charging foreign VAT, and the business buyer accounts for both input and output VAT in their own domestic tax return, eliminating cross-border tax reclaim delays.
About the VAT & Sales Tax Calculator & Rate Guide
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