To remove VAT from a price that already includes it, divide the price by 1 plus the VAT rate. At 20% VAT, a 120 price divided by 1.2 gives a net price of 100, so the VAT inside it is 20. Taking 20% off the 120 would give 96 and suggest 24 of tax, which is wrong by a fifth.
This matters for more than tidy bookkeeping. Every tourist refund estimate, every cross-border price comparison and every "it's cheaper without the tax" claim starts from this number. If the first step is wrong, everything built on it inherits the error.
The formula, in one line
VAT, GST and similar consumption taxes are charged as a percentage of the net price. The shop adds the tax on top, then shows you the total. To go backwards, you have to undo a multiplication, which means dividing:
| Net price | gross ÷ (1 + rate) |
|---|---|
| VAT inside the price | gross − net, or gross × rate ÷ (1 + rate) |
| Adding VAT to a net price | net × (1 + rate) |
The rate goes in as a decimal: 20% is 0.20, so 1 + rate is 1.20. If you prefer a shortcut, the VAT share of any gross price is rate ÷ (1 + rate). For 20% that is 0.2 ÷ 1.2, exactly one sixth.
Why subtracting the percentage gives the wrong answer
The percentage on the receipt describes the relationship between the tax and the net price. Subtracting it from the gross price applies it to a larger base, so you remove too much. The higher the rate, the bigger the overshoot.
| Correct: 120 ÷ 1.20 | Net 100.00 · VAT 20.00 |
|---|---|
| Wrong: 120 − 20% | “Net” 96.00 · “VAT” 24.00 |
| Overstatement of tax | 4.00, or 20% too much |
The quick check is to add the tax back. 100 plus 20% is 120, which matches the receipt. 96 plus 20% is 115.20, which does not. If your reverse calculation cannot reproduce the original price, it is wrong.
Worked examples at common rates
These rates appear in the country notes on this site and were checked against the linked authority pages. The gross price of 1,000 is a round illustration, not an observed price.
| Rate | Divide by | Net price | Tax inside | Share of gross |
|---|---|---|---|---|
| 20% (United Kingdom VAT) | 1.20 | 833.33 | 166.67 | 16.67% |
| 19% (Germany VAT) | 1.19 | 840.34 | 159.66 | 15.97% |
| 10% (Australia GST) | 1.10 | 909.09 | 90.91 | 9.09% |
| 9% (Singapore GST) | 1.09 | 917.43 | 82.57 | 8.26% |
| 5% (UAE VAT) | 1.05 | 952.38 | 47.62 | 4.76% |
Notice the last column. Even before any refund fee, a traveler in Germany can at most recover about 16% of the receipt total, not 19%. In the UAE the ceiling is under 5%. That gap between the headline rate and the real share is the first reason refund estimates disappoint.
Some countries apply more than one rate. Food, books or medicine may use a reduced rate, and a single receipt can mix rates. Work out each line separately, using the rate printed against it on the invoice.
What this means for a tourist refund
The VAT inside the price is the most a refund could ever return. What actually comes back is usually lower, because refund operators keep a share of the tax, some charge a fixed fee per transaction, and many schemes set a minimum spend. A store can also simply not take part. Our guide to why your tax refund is smaller than the tax walks through each deduction.
| VAT inside at 5% | 1,050 − 1,050 ÷ 1.05 = 50.00 |
|---|---|
| Operator keeps 13% of the VAT | 50.00 × 0.87 = 43.50 |
| Fixed fee per transaction | 43.50 − 3.60 = 39.90 |
| Estimated refund | AED 39.90, or 3.8% of the receipt |
The 13% deduction and AED 3.60 fee are the figures quoted on the UAE Federal Tax Authority service page when this site last checked it; the UAE field note links the source. Had the 5% been subtracted from the gross price, the starting point would have been 52.50, and every later step would have been inflated with it.
The tourist refund calculator runs this sequence for any rate, fee and minimum, and stops at zero instead of producing a negative refund.
Comparing prices across countries
A tax-inclusive European or Asian price and a pre-tax US or Canadian shelf price are not the same kind of number. Comparing them directly flatters the country whose price leaves the tax out. There are two honest ways to line them up:
- Compare what you would actually pay at checkout, by adding the local sales tax to the pre-tax price. The sales tax calculator does this.
- Compare net prices, by dividing tax-inclusive prices by 1 plus their rate. This shows how the seller prices the product, but it is only what you pay if you really receive the full tax back, which is rare.
The price tables on this site keep the two kinds of price apart and mark pre-tax US and Canadian observations as incomplete. Our explainer on sales tax and VAT on price tags abroad covers which countries show which.
Three checks before you trust a number
- Is the price gross or net? Consumer prices in VAT countries are normally shown with tax included. Business price lists and US shelf tags are usually shown without it.
- Which rate applies to this item? Use the rate on the invoice line, not a country’s headline rate, if the product could fall into a reduced band.
- Does adding the tax back reproduce the receipt? If it does not, the calculation went the wrong way.
The VAT calculator shows both directions side by side, and the calculation rules page documents how the landed-cost calculator handles tax-inclusive and tax-exclusive quotes.