What is VAT?
VAT (Value Added Tax) is a consumption tax used throughout the UK, EU, and many other countries around the world — the US doesn't have a national VAT, which is why this often trips up US shoppers, travelers, and businesses dealing with foreign invoices. The most important practical difference from US sales tax: VAT is typically already included in the displayed price, while US sales tax is usually added at checkout, on top of the sticker price. A price tag showing £120 in the UK already includes VAT; a 100-dollar price tag in a US store does not include the sales tax that gets added at the register.
Adding VAT (Net to Gross)
Tax Amount = Net Price × (VAT Rate ÷ 100) Gross Price = Net Price + Tax Amount Example: Net Price 100, VAT Rate 20% Tax Amount = 100 × 0.20 = 20.00 Gross Price = 100 + 20.00 = 120.00 Finding the VAT rate (Gross to Rate)
This direction is useful when you have a receipt or invoice showing the total price and the tax charged, but not the rate itself.
Net Price = Gross Price − Tax Amount VAT Rate = (Tax Amount ÷ Net Price) × 100 Example: Gross Price 120, Tax Amount 20 Net Price = 120 − 20 = 100.00 VAT Rate = (20 ÷ 100) × 100 = 20% Frequently asked questions
How do I calculate VAT from a net price?
Multiply the net price by the VAT rate as a decimal to get the tax amount, then add that to the net price for the gross (total) price. A net price of 100 at a 20% VAT rate gives a tax amount of 20 and a gross price of 120.
How do I find the VAT rate from a receipt?
Subtract the tax amount from the gross (total) price to get the net price, then divide the tax amount by the net price and multiply by 100. A gross price of 120 with a tax amount of 20 gives a net price of 100 and a VAT rate of 20%.
Is VAT the same as US sales tax?
They're both consumption taxes, but they work differently. VAT is typically included in the displayed price and is common throughout the UK, EU, and elsewhere; US sales tax is usually added at checkout on top of the sticker price and varies by state and locality rather than being a single national rate.