Add or remove VAT from a price at any common European rate.
Adding VAT: VAT = price × rate/100. Removing VAT: net = price / (1 + rate/100).
VAT (Value Added Tax) works fundamentally differently from a simple US-style sales tax, even though both eventually load the tax onto the end consumer. VAT is a multi-stage tax, charged at every step of the supply chain — manufacturer to wholesaler, wholesaler to retailer, retailer to consumer — rather than only once at the final point of sale. What makes this workable without compounding into a runaway tax burden is the input credit mechanism: every VAT-registered business charges output VAT on what it sells and pays input VAT on what it buys, then remits only the difference to the tax authority. If a business's input VAT exceeds its output VAT in a period, it gets a refund of the difference; if output exceeds input, it pays the balance.
The practical effect of this system is that VAT doesn't stack on top of itself as goods move through multiple hands — each business in the chain recovers what it paid on its own purchases, so only the value genuinely added at each stage gets taxed there, and the economic burden ultimately lands entirely on the final consumer, who has no ability to reclaim any input credit. This is the key structural difference from a traditional single-stage sales tax, which only taxes the final transaction and has no input-credit mechanism at all — a reselling business typically avoids paying sales tax on inventory purchases by providing a resale certificate, rather than paying the tax and reclaiming it later. VAT's multi-stage collection with input credits is also why it's harder to evade than a single-point sales tax: even if one business in the chain underreports, VAT has already been captured at every prior stage of the supply chain.
VAT is charged at every stage of the supply chain (manufacturer, wholesaler, retailer), while a traditional sales tax is charged only once, at the final sale to the consumer. VAT uses an input tax credit system so it doesn't compound across stages; sales tax has no such mechanism and simply taxes the one final transaction.
No — because of input tax credits. Each VAT-registered business charges VAT on what it sells (output VAT) but reclaims the VAT it paid on its own purchases (input VAT), remitting only the difference. This means only the value actually added at each stage gets taxed there, preventing the tax from compounding as goods pass through multiple businesses.
The final consumer, entirely. Every business in the supply chain recovers the VAT it paid through input credits, but the end consumer has no right to reclaim any VAT — so while VAT is technically collected at every stage, its full economic burden lands on whoever makes the final purchase.
Because VAT is captured incrementally at every stage of the supply chain rather than relying on one single transaction being correctly reported. Even if one business in the chain underreports its sales, VAT has typically already been collected at earlier stages, unlike a sales tax system where evasion at the single final sale point means the entire tax is lost.