Adding tax and removing tax are not mirror images
The most common tax mistake is subtracting the rate from a tax-inclusive total. Tax is calculated on the pre-tax price, so removing it needs division, not simple subtraction of a percentage.
The formulas
- Add tax: total = net price x (1 + rate).
- Tax amount = net price x rate.
- Remove tax: net price = total / (1 + rate).
- Tax contained in a total = total minus net price.
Worked example at a 15 percent rate
Adding tax: a net price of 100 becomes 100 x 1.15 = 115, of which 15 is tax. Removing tax: from a total of 115, the net price is 115 / 1.15 = 100. The wrong shortcut, 115 x 0.85, gives 97.75, which is incorrect.
Use the calculator
- Open the GST / VAT Calculator.
- Enter the amount and the tax rate that applies to your item and location.
- Choose add tax or remove tax.
- Read the net amount, the tax amount and the total, which are shown separately.
Check the rate that applies to you
Rates, exemptions and rules for what is taxable differ between countries and change over time, and some goods or services have reduced or zero rates. Confirm the current rate with your national tax authority or accountant. Use this guide and the calculator for the arithmetic, not for tax advice.
Tips for invoices
- Show net price, tax amount and total as separate lines.
- Round tax per line or per invoice consistently, following your local rules.
- Keep your tax registration number on invoices where it is required.