VAT Calculator

VAT and GST: what every freelancer and small business needs to know

Value-added tax (VAT) — or its equivalent in non-EU countries, the Goods and Services Tax (GST) — is the most widely used consumption tax in the world. If you invoice clients, sell products online, or operate a business that crosses country borders, you will almost certainly encounter it. Understanding how VAT works is not optional; getting it wrong on an invoice means either overcharging your client, undercharging the tax authority, or both.

How VAT works

VAT is collected at every stage of the supply chain — from manufacturer to wholesaler to retailer to end consumer. At each step, a business charges VAT on its sales (output VAT) and reclaims the VAT it paid on its purchases (input VAT). Only the difference goes to the tax authority. The end consumer, who cannot reclaim, bears the full cost.

This design means that VAT is largely self-enforcing: each business in the chain has an incentive to obtain VAT invoices from its suppliers so it can reclaim input VAT. A correct VAT invoice is therefore not just a formality — it is the document that allows your client to recover the tax they paid you.

Adding VAT to a net price vs. extracting it from a gross price

There are two common situations where you need to calculate VAT:

Adding VAT to a net amount (also called exclusive of VAT): you know the pre-tax price and need to calculate the total your client will pay. The formula is: Gross = Net × (1 + rate/100). For example, a €1,000 net invoice at 19% German MwSt produces a gross of €1,190.
Extracting VAT from a gross amount (also called inclusive of VAT): you know the total price already includes tax and want to find the net and the VAT component. The formula is: Net = Gross ÷ (1 + rate/100). For €1,190 gross at 19%, the net is €1,000 and the VAT is €190. Note that dividing by the rate directly gives the wrong answer — you must always divide by (1 + rate).

When do you need to register for VAT?

Registration requirements vary by country. Most have a turnover threshold below which small businesses are exempt — typically €22,000–€50,000 in EU countries, £90,000 in the UK, and AUD 75,000 in Australia. Once you exceed the threshold, registration is compulsory, not optional.

If you sell digital services to consumers in other EU countries, you may need to register for the EU's One Stop Shop (OSS) scheme even before exceeding domestic thresholds. The same applies to UK VAT on digital services sold to UK consumers after Brexit. Cross-border selling has added significant complexity to VAT obligations for freelancers and online sellers.

Standard rates, reduced rates, and zero rates

This calculator uses standard rates only. Most countries also have reduced rates for specific categories of goods and services:

Reduced ratestypically apply to food, medicines, books, children's clothing, and public transport. In the EU, most countries have at least one reduced rate alongside the standard.
Zero ratesmean the supply is taxable but at 0% — so you charge no VAT, but you can still reclaim input VAT. The UK zero-rates most food and children's clothes. This is different from being exempt.
Exempt supplies are outside the VAT system entirely. Financial services, insurance, and healthcare are commonly exempt. If you make exempt supplies, you cannot reclaim the VAT on costs related to those supplies.

For professional services — consulting, design, software, writing, marketing — the standard rate almost always applies. If you are unsure whether a reduced or zero rate covers your service, check with your local tax authority or an accountant.

VAT vs. sales tax (US and Canada)

The United States does not have a federal VAT. Instead, US states levy their own sales taxes, typically charged only at the point of final sale to the consumer. Unlike VAT, sales tax is not recoverable by businesses — it is a one-time cost at the end of the chain. Rates vary from 0% (Oregon, Montana, and a few others) to above 10% when combined with local levies.

Canada uses a hybrid system. The federal government charges a 5% GST on most goods and services. Some provinces harmonise with the federal government into a single Harmonized Sales Tax (HST) — ranging from 13% in Ontario to 15% in the Atlantic provinces — while others charge a separate Provincial Sales Tax (PST) on top of the federal GST. The mechanics are closer to VAT than to US sales tax, in that registered businesses can claim input tax credits.

How to show VAT on an invoice

A valid VAT invoice must show both the net amount and the VAT amount separately. Most jurisdictions also require your VAT registration number, the invoice date, and a description of the supply. If your client is VAT-registered, they need these details to reclaim the input tax. An invoice that shows only the gross total without breaking out the VAT gives your client nothing to work with.

When invoicing across borders within the EU, the rules become more nuanced — B2B supplies to registered businesses in other member states are often zero-rated under the reverse charge mechanism. In that case, you show the net amount, write "VAT: €0 — reverse charge applies" or similar, and include your client's VAT number. Your client self-accounts for the VAT in their own jurisdiction.