Removing VAT from a price: the €123 example
A price of €123 that includes VAT at 23% contains exactly €100 of net value and €23 of VAT. You find that by dividing €123 by 1.23, not by taking 23% off €123. That second method is the single most common VAT error, and it always understates the net amount.
The right way
The VAT-inclusive price is 1.23 times the net price, because the net is 100% and VAT adds another 23%. To reverse that, divide the gross figure by 1.23:
€123 / 1.23 = €100 net
The VAT is the difference: €123 − €100 = €23. The same logic scales to any amount. A gross price of €500 at 23% divides out to €406.50 net, with €93.50 of VAT inside it.
The wrong way, in full
The instinctive shortcut is to take 23% off the gross price directly:
€123 − (23% × €123) = €123 − €28.29 = €94.71
That’s €5.29 short of the correct €100. The error is subtle but exact: 23% of €123 is not the same figure as 23% of €100. VAT is always calculated on the net amount, never on the gross amount, so subtracting a percentage of the gross price removes too much. The gap between €94.71 and €100 is not rounding — it’s a structurally wrong calculation that happens to look plausible.
Why it matters
This distinction has real consequences wherever the net figure is the one that counts rather than the sticker price.
- Expense claims: if you’re reclaiming the net cost of a purchase, using the wrong-way figure understates every claim you file.
- Invoices: a supplier who back-calculates net from gross incorrectly will issue invoices that don’t reconcile with their own VAT return.
- Price comparisons: comparing two VAT-inclusive prices across different rates only works once each has been split into net and VAT correctly — get the split wrong and the comparison is wrong too.
The fix costs nothing extra: divide by (1 + rate), don’t multiply by rate and subtract.
Try your own numbers
| Starting point | Rate | Net | VAT | Gross |
|---|---|---|---|---|
| Net €100 | 23% | €100 | €23 | €123 |
| Net €100 | 13.5% | €100 | €13.50 | €113.50 |
| Gross €123 | 23% | €100 | €23 | €123 |
| Gross €500 | 23% | €406.50 | €93.50 | €500 |
| Gross €500 | 13.5% | €440.53 | €59.47 | €500 |
The trap, for comparison: €123 minus 23% gives €94.71 — wrong, for the reason explained above.
These figures use Irish VAT rates (Revenue, effective 1 January 2026, as of this review): standard rate 23%, reduced rate 13.5%, second reduced rate 9%, livestock rate 4.8%, and the flat-rate scheme for farmers at 4.5%. The same net-first method applies under any country’s rates — only the percentage changes.