VAT-Inclusive vs VAT-Exclusive Pricing
VAT (Value Added Tax) is an indirect consumption tax levied at each stage of the supply chain. In most countries, consumer prices are displayed inclusive of VAT (you pay what you see), while business-to-business invoices typically show exclusive prices with VAT listed separately.
The Two Formulas
Adding VAT: Gross = Net × (1 + r) — where r is the rate as a decimal (e.g., 20 % → 0.20). Removing VAT: Net = Gross ÷ (1 + r). The VAT amount is always Gross − Net.
Common VAT Rates
Standard rates vary by country: Germany 19 %, France 20 %, UK 20 %, Sweden 25 %, Poland 23 %, Romania 19 %, Turkey 20 %. Reduced rates (5–10 %) typically apply to food, medicine, and books.
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