VSThiran

VAT-inclusive vs VAT-exclusive price

Quick answer

A VAT-inclusive price already has tax built into the total shown. A VAT-exclusive price does not - tax is added on top at checkout or on the invoice. Converting from inclusive to exclusive means dividing by (1 + rate), not subtracting the tax percentage directly.

Convert between inclusive and exclusive pricesAll Calculators tools

Free, no sign-up, and your file is read on your own device rather than uploaded.

These two terms describe whether a displayed price already has tax folded into it or not. Consumer-facing retail prices are very often VAT-inclusive - the sticker price is what you pay. Business-to-business quotes and invoices are more often VAT-exclusive, with tax added as a separate line so each party can see exactly how much tax was charged.

The confusion usually shows up when someone needs to go from one to the other and reaches for the wrong arithmetic - subtracting a percentage from a total does not undo the effect of adding that percentage to a smaller starting number.

Step by step

  1. Exclusive to inclusive

    Multiply the exclusive amount by (1 + rate) - e.g. by 1.20 for 20% VAT.

    VAT / GST Calculator

  2. Inclusive to exclusive

    Divide the inclusive amount by (1 + rate) - not subtract the percentage.

    VAT / GST Calculator

Tips

  • A $120 price that includes 20% VAT breaks down to $100 pre-VAT and $20 VAT - not $96 pre-VAT, which is what wrongly subtracting 20% of $120 gives.
  • When comparing prices between two suppliers, confirm both are quoting on the same basis (both inclusive, or both exclusive) before comparing the numbers directly.

Common problems

A quote and an invoice for the same purchase show different-looking totals.

One is very likely inclusive and the other exclusive - check which basis each figure is quoted on before assuming there is a pricing error.

Frequently asked questions

Which is more common - inclusive or exclusive pricing?
It varies by country and by context. Consumer retail prices are commonly inclusive; B2B quotes and invoices are commonly exclusive with tax itemised separately. Check the specific convention where you are.
Does this apply to GST and sales tax too, not just VAT?
Yes - the same inclusive/exclusive distinction and the same conversion arithmetic apply regardless of what the tax is called locally.

Related related tools

Related articles

Ready to do it?

Free, no sign-up, and nothing is uploaded to a server.

Convert between inclusive and exclusive pricesAll articles