What is Value Added Tax (VAT)?
Value Added Tax (VAT) is a consumption tax applied to goods and services at each stage of production or distribution. Unlike sales tax which is only charged at the final point of sale, VAT is collected at every step of the supply chain, with businesses able to reclaim VAT paid on their inputs. VAT is used by over 160 countries worldwide and is a major source of government revenue.
How VAT is calculated
To add VAT: Gross = Net × (1 + VAT Rate / 100). To remove VAT: Net = Gross / (1 + VAT Rate / 100). The VAT amount is simply the difference between gross and net. For example, with a 20% VAT rate on a £100 net amount: VAT = £20, Gross = £120. Conversely, a £120 gross amount contains £20 VAT and £100 net.
VAT rates around the world
VAT rates vary significantly by country. Hungary has the highest standard rate at 27%, while countries like the UAE and Saudi Arabia charge just 5%. Many countries also have reduced rates for essential goods like food, medicine, and children's clothing. Our calculator includes presets for the most common country rates to save you time.