How to remove VAT from a price (and the mistake almost everyone makes)
Removing VAT is not the same as subtracting the VAT percentage. Here is the correct formula, why the intuitive method is wrong, and how much it costs you.
Published
If you have a total that already includes VAT and you need the price before tax, there is one thing you must not do: subtract the VAT percentage from the total.
It feels right. It is wrong every single time.
The mistake
Say you have a €121 invoice total at a 21% VAT rate. The tempting move is to take 21% off:
121 − (121 × 0.21) = 121 − 25.41 = 95.59That gives €95.59. The correct answer is €100.
The error is small in percentage terms but it compounds across every line of every invoice, and it always understates the net figure.
Why it is wrong
VAT is calculated on the net amount, not on the gross. When the tax was added, the sum was:
Net × 1.21 = Gross
100 × 1.21 = 121So to reverse it you have to undo a multiplication, which means dividing — not subtracting.
Net = Gross ÷ (1 + rate)
100 = 121 ÷ 1.21Subtracting 21% removes 21% of the gross, but the VAT that was actually added was 21% of the net, which is a smaller number. Those are different quantities, and that difference is the whole error.
The correct formula
To remove VAT from a gross amount:
Net = Gross ÷ (1 + rate/100)
VAT = Gross − NetTo add VAT to a net amount:
Gross = Net × (1 + rate/100)
VAT = Gross − NetHow big is the error?
The gap widens as the rate rises. For a €1,000 gross total:
| Rate | Correct net | Subtracting the % | Error |
|---|---|---|---|
| 19% | €840.34 | €810.00 | €30.34 |
| 20% | €833.33 | €800.00 | €33.33 |
| 21% | €826.45 | €790.00 | €36.45 |
| 25% | €800.00 | €750.00 | €50.00 |
| 27% | €787.40 | €730.00 | €57.40 |
At Hungary’s 27% rate you would understate the net by nearly 6% of the invoice. On a year of invoices that is a serious bookkeeping problem.
A shortcut worth memorising
To go from gross to net, divide by:
- 1.19 for Germany
- 1.20 for France and Austria
- 1.21 for the Netherlands, Belgium and Spain
- 1.25 for Denmark and Sweden
Do it automatically
The VAT calculator does this both ways and shows the formula it used, so you can check the working rather than trust it. Pick a country to load its standard rate, or type your own for reduced rates.
If you want the rate and worked examples for one specific country, the per-country pages cover all 27 EU member states — for example Germany, the Netherlands and France.