To remove the standard VAT from the price of a product or service, divide the price including VAT by 1.2. To remove the reduced VAT from a product, divide the price by 1.05. Standard VAT is 20 percent and reduced VAT is 5 percent.
The VAT is a Value Added Tax that is added on to goods and services. It is a general tax that applies to all production and distribution of goods and services. Many people refer to it is a consumption tax because it is paid by the final consumer as a percentage of the price.
A VAT tax is charged to any person who supplies taxable goods and services but in order to be charged, he or she has to meet an income threshold. EU law states that the standard VAT rate must be at least 15 percent and the reduced rate must be at least 5 percent. However, actual rates vary by Member States.
As of 2014, all Member States use VAT. From the consumer's point of view, it is simply a tax on the purchase price and from the seller's point of view it is a tax added to the value of the material, product or service they sell.