FREE VAT Tax Calculator – Perfect for eCommerce

Value-added tax or VAT calculator is a free tool that you can use to measure the amount you have to pay to the government. You can also measure the gross price of the goods or products on the basis of their net value. With the help of the free VAT calculator, it is simple to calculate the VAT rate or the final VAT-inclusive price within a few minutes.

What is VAT?

VAT, or the value-added tax, is a tax imposed on goods and services based on their value. This is mainly imposed in the supply chain management system where the manufacturing, distribution, and supply— all these things are involved in increasing a product’s value. As this tax is applied to goods and services, it is also called GST in some countries.

Approximately 20 percent of worldwide tax revenue is derived from VAT, which is one of the main sources of funding for governments globally. Approximately 160 countries have implemented this consumption tax. The European Union mandates a minimum VAT rate for all member countries. This has resulted in an increase in the VAT rate in those countries since the 20th century. However, the US is not under this category as a developed country.

VAT formula

When you need to pay the VAT for your business, it does not mean you have to pay the total VAT amount. There is a simple formula you can use in calculating the amount you need to pay to the government.

VAT formula: Output VAT – Input VAT

Output VAT: It is imposed on your own selling price of the products when you register your business to VAT.

Input VAT: It is the tax that you need to pay on the purchase of the products.

Now, you have to calculate the total output VAT and the total input VAT that you can able to recover. Then, just put the values in the formula. If the output VAT is higher than the input VAT, the resultant amount will be your payable VAT. And if the output VAT is lower than the input one, in that case, you will get a refund and no need to pay the VAT.

Although, you can use a free VAT calculator instead of doing these things manually. It will help you generate accurate results instantly.

How to calculate VAT?

It is pretty simple to calculate the VAT using a formula.

First, you need to estimate the net price. It is the VAT-exclusive price. Let’s assume it is €50. Now measure the VAT rate. Let’s take it 20%. As we are expressing it into percentages, you need to divide it by 100. So, the value will be 0.20.

Now, calculate the VAT amount. Here you must multiply the VAT rate by the net amount. It means €50 x 0.20. It will give you a value of €10.

If you want to determine the gross price, take the net price and add it to the VAT amount. The calculation is  €50 + €10. So, the gross price will be  €60. If you want to calculate all these things in the fastest and most accurate way, you can use the free VAT calculator anytime you want.

VAT Example

Let’s take an example to discuss the VAT more precisely. Below we will see an example where the VAT rate will be 10% in each step. Here the VAT applied to a coffee seller, roaster, and the farmer producing the coffee beans.

Initially, coffee beans are produced by a farmer. Now the roaster pays $5.00 per pound of coffee. So, if we include the VAT amount, the payable VAT will be (10% x $5) = $0.50. So, the farmer will get $5.50 per pound of coffee beans.

Now if the roaster charges $10 per pound of coffee from the shop owner, the shop owner has to pay $11 per pound of roasted coffee beans. It includes the VAT, which is $1. Although, the roaster does not have to pay the entire VAT, $1 as the farmer has already paid $0.5 to the government.

The coffee shop now sells 5 cups of coffee from one pound of roasted coffee beans at $20. That means the buyers have to pay $4 per coffee cup. For the 5 cups of coffee, the payable VAT will be $2. So, the total value for the 5 cups of coffee is $22. Although, the coffee shop has to pay only $1 to the government as half portion has already been paid by the farmer and roaster.

How to use the VAT calculator?

Using the VAT calculator is pretty straightforward. You need to collect the data of Net before VAT price, VAT rate, and final VAT inclusive price in dollars. Now put the value into the respective box and click the calculate button. It will show you the result within a minute. You can check for other values by clicking the reset button.

Why is VAT important?

VAT is a type of tax accepted by many countries. VAT is beneficial in maintaining uniformity in the payable tax at all levels of manufacturing and selling goods. So, let’s understand the importance of VAT in the section below,

• Uniformly applied VAT contributes to a significant amount of revenue.
• Fiscal policy deficits can be resolved, and tax policy can be strengthened.
• International trade is encouraged by the use of the value-added tax, a system that is globally accepted.
• VAT is applied for all, from the farmers to sellers who are involved in producing and selling the goods. The difficulty of tax evasion is thus increased, thereby promoting transparency.

VAT Calculator FAQs

How do I work out 20% VAT on a price?

It is simple to calculate the 20% VAT amount by multiplying the net amount by 1.20. You will get the gross amount. And if you want to determine the VAT amount within the total amount, calculate the gross amount divided by 1.20 = net amount x 0.20. It will give you the result, VAT included.

Is the EComBusinessHub VAT calculator free to use?

Yes, absolutely. You can use this tool free of cost. Just enter the value for the Net before VAT price, VAT rate, and final VAT inclusive price in the respective box to find out the result. You can check other VAT prices by clicking the reset button.

Is the VAT calculator useful for drop shippers?

Yes, of course. The drop shippers also have to pay taxes when they sell their products, like the import VAT or customs duties. Especially if you run your drop shipping business in Europe, you are obliged to pay the tax.