Every invoice, every receipt, every quote: net, gross and VAT appear everywhere. Understanding these terms and the formulas behind them helps you avoid mistakes on invoices, offers and tax returns. Our VAT calculator gives you the answer instantly.

What is VAT?

Value Added Tax (VAT) is a consumption tax levied on the sale price of goods and services. In Germany, it is officially called Umsatzsteuer (USt). End consumers bear the tax; businesses collect and remit it to the tax office.

Two rates apply in Germany:

  • 19% standard rate — applies to most goods and services
  • 7% reduced rate — applies to food, books, newspapers, local public transport, hotels and other essential goods

Net, Gross and VAT: Key Terms

  • Net (Netto) — the price without VAT (what the seller receives)
  • Gross (Brutto) — the final price including VAT (what the buyer pays)
  • VAT amount — the difference between gross and net

Formulas: Net to Gross and Back

Net to Gross (add VAT)

Gross = Net x (1 + tax rate)

Example at 19%: 100 x 1.19 = 119.00

Example at 7%: 100 x 1.07 = 107.00

Gross to Net (remove VAT)

Net = Gross / (1 + tax rate)

Example at 19%: 119 / 1.19 = 100.00

Example at 7%: 107 / 1.07 = 100.00

Calculate VAT Amount

VAT = Gross - Net

Or directly: VAT = Net x tax rate

Worked Example: Laptop for 999 Gross

A laptop costs 999 in the store (gross). The standard rate is 19%.

  • Net: 999 / 1.19 = 839.50
  • VAT amount: 999 - 839.50 = 159.50

Try it with our VAT calculator.

When Does 7% Apply Instead of 19%?

The reduced rate of 7% applies to:

  • Food (bread, milk, fruit, vegetables)
  • Books, newspapers and magazines
  • Local public transport (up to 50 km)
  • Hotel overnight stays
  • Works of art and collectibles
  • Medical aids

Note: Beverages (except tap water) are taxed at the full 19%. Restaurant meals have been taxed at 19% again since 2024.

VAT for Freelancers and Businesses

Freelancers and businesses must show VAT on their invoices. Key points:

  • Input tax deduction (Vorsteuerabzug): Businesses can reclaim VAT paid on purchases from the tax office
  • Small business rule (Kleinunternehmerregelung): With revenue under 22,000 per year, you can opt out of charging VAT
  • Reverse charge: For cross-border B2B transactions within the EU, the recipient owes the tax

Common Mistakes to Avoid

  • Wrong tax rate: Check whether 7% or 19% applies — especially on mixed invoices
  • Calculating VAT on gross: VAT is always calculated on the net amount, not on gross
  • Rounding errors: Calculate the tax first, then round — not the other way around

Conclusion

VAT is straightforward once you know the formulas. Net times factor gives gross, gross divided by factor gives net. Our free VAT calculator does the math for you — for 19% and 7%, instantly and without registration.