Adding VAT to a net price
VAT = net × rate / 100, and the gross price is the net plus that VAT. A €1,200 net invoice at 20% carries €240 of VAT and comes to €1,440 - the three figures the page prints in its first row.
Business-to-business quotes are usually on net terms, and for a VAT-registered business the net figure is the one that affects margin: the tax charged on the invoice is collected on behalf of the tax authority, not earned. Consumers see the gross price, which is why the same transaction looks larger on the shelf than on the invoice.
The rate field accepts anything from 0 to 40%; an entry outside that range falls back to 20% rather than producing a figure the rest of the page would have to disown.
Taking VAT out of a gross price
When the tax is already inside the price, the net amount is gross / (1 + rate / 100). At 20%, €1,440 gross is €1,200 net and €240 of VAT. The shortcut of subtracting 20% of €1,440 would give €288, which is too much tax by €48.
The VAT inside a gross price is always a smaller share of that price than the headline rate: 20% of the net works out to 16.67% of the gross. That gap is the usual reason a VAT figure looks lower than expected on a receipt.
The page states the share of gross beside the amount, and the note under the answer spells out that the two directions return the same three numbers - so a net quote and a shelf price describe the same money only when the gross figures agree.
Rates and reduced goods
Each country sets its own rate. In the European Union the standard rate cannot be below 15%, and the actual range runs from 17% in Luxembourg to 27% in Hungary, with most member states between 19% and 25%.
Reduced rates apply to specific categories such as food, books, medicine, children’s clothing and some transport. The same company can charge 20% on one invoice line and 5% on another, which is why VAT is calculated per line rather than per invoice.
The comparison table runs the same net amount through fourteen standard rates from 5% to 27%, so a price can be checked against several countries at once. It is a comparison, not a rate table for your jurisdiction: the rate field is where the country that applies to you goes.
The margin scheme
Dealers in second-hand goods, art and antiques can charge VAT on the margin instead of the full selling price. Buy a camera for €900 and sell it for €1,200 including tax, and the taxable margin is €300, so at 20% the VAT is €50 rather than the €200 the full price would carry.
In this mode the amount you enter is read as the VAT-inclusive selling price, because that is what the dealer charges the customer. The page subtracts the purchase price, then takes the tax out of the margin rather than adding it on: the margin is multiplied by the rate divided by 100 plus the rate. Negative margins are floored at zero, and the comparison row shows what VAT on the full price would have been.
Businesses using the scheme cannot show VAT separately on the invoice and cannot reclaim VAT on the purchase. That trade-off is what makes it worthwhile only for goods bought from private sellers who charged no VAT to begin with.
The decimal in the price is not the rate
Moving between net and gross is not a matter of subtracting the rate. A €1,200 shelf price at 20% is not €1,200 minus €240; the tax inside it is €200, because the net figure is the number the rate was applied to. The divisor is 1.20, not 0.80, and that one-step difference is the most common error in a VAT spreadsheet - the page prints the divisor next to the answer so the check can be done by hand.
The same distinction explains why the VAT share of a gross price is always smaller than the rate: 20% of the net is 16.67% of the gross. The table in the result shows both directions with the same three numbers, which is a way of saying that a quote on net terms and a shelf price on gross terms describe the same money only when the gross figures agree.
Danfio