Calculate VAT or sales tax: add tax to net and reverse gross to net

Adding VAT vs reversing VAT from a tax-inclusive price

Adding a 20% VAT or sales tax rate to a net price of 250 multiplies by (1 + Rate): 250 * 1.20 = 300.00.

Reversing a tax-inclusive gross price of 300 back to net does NOT subtract 20% (300 * 0.80 = 240, a classic bookkeeping error). Because 300 equals 120% of the net price, divide by (1 + Rate): 300 / 1.20 = 250.00 net and 50.00 embedded VAT.

Gross, reverse net, and embedded tax formulas

The example rounds to two decimal places. Line-level and invoice-level rounding can differ; use the rounding policy required for your actual invoice.

=ROUND(C2 / (1 + B2), 2)

Extract embedded VAT directly from gross

For a gross amount already expressed in cents, subtract the rounded net amount to make the displayed net and tax sum back to that gross.

=ROUND(C2 - ROUND(C2 / (1 + B2), 2), 2)

Inputs and interpretation

Rates here are hypothetical inputs, not a statement of current tax law. This assumes one nonnegative ad-valorem rate on the whole net amount and no exemptions or compound taxes. Mixed-rate invoices require separate lines. Confirm the applicable rate, currency minor units, and rounding convention separately.

Further reading

• Microsoft Support — ROUND function