How VAT works in the EU and UK
Value Added Tax (VAT) is a consumption tax added to most goods and services. In the EU, each country sets its own standard rate, but they must be at least 15%. Most also have one or two reduced rates for specific categories like food, books, or medical supplies.
Businesses registered for VAT charge VAT on their sales (output VAT) and reclaim VAT on their purchases (input VAT), paying or reclaiming the difference quarterly. The threshold for mandatory registration varies by country — typically €10,000 to €100,000 in annual revenue.
Add VAT vs reverse VAT
Add VAT: you have a net price (e.g. €1,000) and want to know the total customers will pay. Multiply by (1 + rate ÷ 100). At 21%, €1,000 becomes €1,210.
Reverse VAT: you have a gross total (e.g. €1,210) and want to know the net amount. Divide by (1 + rate ÷ 100). At 21%, €1,210 becomes €1,000 net + €210 VAT.