~2 min read
When you invoice a client in a VAT-registered country (UK, EU, Australia, etc.), you need to know whether your quoted price is VAT-exclusive (net) or VAT-inclusive (gross) and calculate the other. Getting this backwards means either undercharging the client or accidentally absorbing the tax yourself.
This calculator handles both directions:
Add tax: Net price × (1 + rate) = Gross price Remove tax: Gross price ÷ (1 + rate) = Net price
Standard rates are pre-populated for common regions (UK: 20%, EU default: 20%/23%, Australia GST: 10%, Canada GST: 5%, US: custom). You can also enter any custom rate.
Key concepts
Net price (ex-VAT / ex-tax): The price before tax. This is what you receive as revenue. VAT paid by the customer goes to the government, not to you.
Gross price (inc-VAT): The total the customer pays, including tax.
VAT / GST registration threshold: In the UK, you must register for VAT when your 12-month taxable turnover exceeds £90,000 (as of 2024). Below that threshold, you don't charge VAT and don't need to remit it. US sales tax has no federal threshold and varies by state.
Frequently asked questions
Do I charge VAT on digital products to overseas customers? EU rules require you to charge VAT at the buyer's country rate when selling B2C digital products to EU customers (the "EU Digital Services" rules). Platforms like Stripe Tax, Paddle, and Lemon Squeezy handle this automatically as "merchant of record." B2B EU sales typically use reverse-charge (customer self-accounts for VAT).
What's the difference between VAT and sales tax? VAT is collected at each stage of production and business customers can reclaim it. US sales tax is collected only at the final retail sale and cannot be reclaimed by businesses. The end-consumer bears both; the mechanics for businesses differ.