Taxes
How to Calculate VAT on an Invoice
VAT (or GST, or sales tax — the name varies by country) either gets added to your net price or is already buried inside your gross price. This guide shows both directions. Check your local rate; it's not a substitute for advice.
By Invoala Editorial Team · Published 2026-08-23 · Updated 2026-08-27
Adding VAT to a net amount
If your prices are quoted before tax: VAT = net × (rate ÷ 100). Gross = net + VAT. So at 20%, a $200 net price becomes $240 gross, with $40 of VAT.
Removing VAT from a gross amount
If your price already includes VAT: net = gross ÷ (1 + rate ÷ 100). At 20%, divide by 1.2 — a $240 gross price has $40 VAT and a $200 net amount.
Putting VAT on the invoice
Show the net, the VAT rate, the VAT amount, and the gross total as separate lines. Tax authorities expect to see the VAT clearly stated — never a single blended number.
Know your rate and your status
Rates differ by country (and sometimes by goods or service type), and whether you must charge VAT at all depends on your registration status and revenue. Verify both before invoicing.
Example
You're registered for VAT at 20%. Your service is $800 net. VAT = $800 × 0.20 = $160. The invoice shows: net $800, VAT (20%) $160, total $960.
Frequently asked questions
Is VAT the same as sales tax?
Similar concept — a consumption tax — but rules differ. VAT applies at each stage of a supply chain with input credits; sales tax is usually charged once at retail. Follow your local terminology and rules.
Do I charge VAT on everything?
No — some goods and services are zero-rated or exempt, and thresholds exist below which you may not charge VAT at all. Confirm with your tax authority.
Does Invoala know my VAT rate?
Invoala calculates whatever rate you enter. It's a calculator, not tax advice — set the rate your jurisdiction requires.
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