How to calculate VAT
Updated October 1, 2026
Value added tax is simple arithmetic, yet it is behind many invoice errors: VAT removed the wrong way, totals that differ by a cent, rates mixed up. Here are the three formulas you need, worked examples and the habits that keep your invoices exact.
The three formulas
Write the rate as a decimal: 20 % = 0.20, 7 % = 0.07. Then:
- VAT amount = net price × rate.
- Gross price (VAT included) = net price × (1 + rate).
- Net price = gross price ÷ (1 + rate).
Worked examples at 20 %
Net 1,250.00 → VAT = 1,250.00 × 0.20 = 250.00 → gross = 1,500.00.
Gross 1,500.00 → net = 1,500.00 ÷ 1.20 = 1,250.00 → VAT = 250.00.
The classic mistake is to remove VAT by taking 20 % off the gross price: 1,500.00 × 0.80 = 1,200.00, which is wrong by 50.00. Always divide by 1 + rate.
Several rates on one invoice
When lines carry different rates (for example 20 % and 10 %), group the lines by rate, compute the VAT of each group, and show one VAT line per rate. The total VAT is the sum of those lines; the gross total is the net total plus the total VAT.
Discounts are applied before VAT: VAT is calculated on the net amount actually charged.
Rounding
Round to the currency’s minor unit (two decimals for the euro or the dirham) and do it consistently: either per line, or per rate on the totals. Mixing both methods is how one-cent differences appear between the invoice and the accounting.
Our calculators work with exact decimal arithmetic and round only at the end, so the totals always add up.
Common rates (2026)
Rates and their scope change: check the rate that applies to your goods or services with your tax administration or accountant.
- Morocco: 20 % standard; 14 %, 10 % and 7 % reduced.
- France: 20 % standard; 10 %, 5.5 % and 2.1 % reduced.
- Spain: 21 % standard; 10 % and 4 % reduced.
- Germany: 19 % standard; 7 % reduced.
General information, checked at the date shown. It does not replace advice from a professional for your situation.