Article
Net, tax, and gross
An invoice has three numbers: net, tax, and gross. Direction says which one you already have. The rate sets the multiplier for the others.
The VAT calculator does this split. Take-home pay is on net to gross pay.
The idea in brief
Net is the amount before VAT, value-added tax. Gross is the amount due. VAT itself is the difference.
At 20% you add 20 to every 100 of net. From a receipt total you recover net by dividing by 1.20.
On this page: VAT is value-added tax. Net is the amount before that tax. Gross is the amount due. This card only splits one amount and one rate into those three numbers. It does not prepare a tax filing.
When this helps
| Situation | What the card shows |
|---|---|
| You know the net amount on an invoice and want to add tax. | The card adds tax and shows the gross amount due. |
| You know the gross amount on a receipt and want to remove tax. | The card divides gross by one plus the rate and splits net and tax. |
| You compare the same amount at 20% and at 10%. | The direction stays the same. You only change the rate and get two sets of numbers. |
From net and from a receipt
At 20%, a common invoice rate, net times 1.20 is gross. The tax itself is net times 0.20. From 1000 net you get 200 tax and 1200 due. At 10% the multiplier is 1.10, at 5% it is 1.05. Zero makes net equal gross in this model, because the formula only knows a number, not a legal exemption.
From a receipt you choose gross to net and divide by one plus the rate. 1200 ÷ 1.20 = 1000 net, tax stays 200. On the card, 2400 at 20% becomes 2000 and 400. This is rate arithmetic, not a filing file and not a tax ID.
What the card will not do
It does not guess whether a service is exempt or whether goods sit at a reduced rate. It does not settle output tax against input tax. If you compare two quotes, lock the same rate and the same direction, or you will compare gross with net and the comparison will mislead you.
A worked example
An invoice for 1000 net
- Tax at 20%: 200.
- Amount due: 1200.
- From a 1200 receipt: 1200 / 1.20 = 1000 net.
Typical numbers from the card
| Inputs | Result |
|---|---|
| You have 1000 net at a 20% rate. | Tax is 200, and the amount due is 1200. |
| The receipt shows 1200 gross at a 20% rate. | Net is 1000, and tax is 200. |
| You have 1000 net at a 10% rate. | Tax is 100, and the amount due is 1100. |
| The receipt shows 2400 gross at a 20% rate. | Net is 2000, and tax is 400. |
Typical mistakes
| Mistake | What goes wrong | How to avoid it |
|---|---|---|
| You read one quote as gross and the other as net. | The price gap is then misleading, because the amounts are not the same kind. | Use the same direction and the same rate before you compare quotes. |
| You read a 0% rate as a legal exemption. | The card only knows the rate as a number. It does not check a legal basis. | Zero only makes net equal gross. It does not mean anything else. |
| You try to count take-home pay on this card. | That is a different formula. Pay is on the net-to-gross page. | Count pay on the net-to-gross page. |
Before you compare invoices
- You know whether the amount is net or gross.
- The rate comes from the invoice or receipt, not from memory.
- The two quotes use the same direction and the same rate.
- The card gives three numbers from one amount. It does not prepare a tax filing.
Frequently asked questions
How much tax is 1000 net at 20%?
200 tax and 1200 gross. 1000 × 0.20 = 200.
How do I remove tax from 1200 gross at 20%?
Divide by 1.20. Net is 1000, tax is 200.
What about 10% on the same 1000 net?
Tax 100, gross 1100.
How is direction different from the amount?
Direction says whether the number you typed is net or gross. The amount is one number.
Does 0% mean an exemption?
On this card zero only makes net equal gross. It does not check a legal basis.
Does this replace bookkeeping?
No. It is three numbers from one amount and a rate, with no return file.