VAT Calculator

How VAT works

Value-Added Tax (VAT) is a consumption tax levied on the value added at each stage of production or distribution. Unlike sales tax — which is collected only at the final retail sale — VAT is collected incrementally as goods move through the supply chain. The end consumer ultimately bears the full tax.

VAT-inclusive vs VAT-exclusive pricing

In the EU and UK, consumer-facing prices are almost always VAT-inclusive — the price you see already includes the tax. Business-to-business quotes are often VAT-exclusive, with VAT added on top. Use the "Add VAT" mode for VAT-exclusive pricing and "Remove VAT" mode when you have a consumer price and need to extract the tax portion.

Standard rates around the world

• Hungary has the highest standard VAT rate in the world at 27%.
• Denmark and Sweden apply 25% across the board.
• The UK standard rate is 20%, with 5% on essentials and 0% on most food and children's clothing.
• The United States is the only major economy without a federal VAT — it uses state-level sales tax instead.

Businesses registered for VAT can usually reclaim the VAT they pay on business expenses. Only the final consumer cannot reclaim VAT — making it a tax on consumption, not on business.

Frequently asked questions

What's the difference between VAT and sales tax?

VAT is collected at each stage of production (each business pays VAT on its inputs and charges VAT on its outputs, reclaiming the difference). Sales tax is collected only at the final retail sale. Both are ultimately paid by the consumer, but VAT is more transparent in the supply chain.

Which country has the highest VAT rate?

Hungary has the highest standard VAT rate in the world at 27%. Denmark, Sweden, Norway, and Croatia apply 25%. The EU requires member states to maintain a standard rate of at least 15%.

What is a reduced VAT rate?

Many countries charge a lower VAT rate (typically 5-12%) on essential goods like food, books, medicines, and children's clothing. The UK charges 0% on most food and children's clothing, 5% on residential energy, and 20% on most other goods.

Can I reclaim VAT as a tourist?

Many countries (Japan, South Korea, EU member states) allow tourists from outside the region to reclaim VAT on purchases above a threshold, typically at the airport before departure. Bring your receipts and passport.

How does VAT affect cross-border trade?

Within the EU, B2B transactions between VAT-registered businesses are zero-rated (0% VAT) — the buyer accounts for VAT via 'reverse charge' in their own country. For B2C sales, the seller charges VAT based on the buyer's location.

What is the difference between GST and VAT?

Goods and Services Tax (GST) is functionally similar to VAT but used by different countries (Australia, New Zealand, India, Singapore, Canada). The math is the same; only the name and specific rates differ.

Why doesn't the US have VAT?

The US relies on state-level sales tax instead. Attempts to introduce a federal VAT or consumption tax have repeatedly failed politically. The US is the only OECD country without a national VAT.

Glossary of key terms

Input VAT

VAT a business pays on its purchases. Can be reclaimed from the tax authority.

Output VAT

VAT a business charges on its sales. Must be remitted to the tax authority.

Tax-Inclusive Price

A price that already includes VAT — standard for consumer-facing prices in the EU and UK.

Tax-Exclusive Price

A price that does not include VAT — VAT is added at checkout. Common for B2B quotes.

Reverse Charge

When the buyer (not the seller) accounts for VAT on a transaction. Common for cross-border B2B sales within the EU.

Common mistakes to avoid

• Confusing tax-inclusive and tax-exclusive prices when comparing across countries
• Forgetting that VAT is included in displayed prices in most VAT countries — unlike US sales tax, which is added at checkout
• Not reclaiming input VAT when registered — businesses lose significant money by not filing reclaims
• Miscalculating reverse-charge VAT on cross-border B2B transactions
• Assuming reduced rates apply — many countries have complex rules on which goods qualify for 0% or 5% rates

Pro tips

• Tourists: keep receipts and reclaim VAT at the airport — for a $1,000 purchase at 20% VAT, you save $200.
• Businesses: register for VAT only when you cross the threshold (£90,000 in the UK) — below it, registration is optional but means you can't reclaim input VAT.
• For B2B quotes, always specify whether prices are VAT-inclusive or VAT-exclusive to avoid disputes.
• Digital service providers selling to EU consumers must register for VAT in each EU country or use the VAT OSS (One Stop Shop) portal.
• Selling into the EU from outside? Consider using a customs broker to handle import VAT correctly — mistakes can be expensive.

Results are estimates for educational purposes only and not financial advice. Consult a licensed professional for advice specific to your situation.