VAT calculator: inclusive and exclusive

Exclusive means the figure you have is net and tax is added on top: 1,000 at 5% becomes 1,050. Inclusive means tax is already inside the figure and has to be extracted: 1,050 inclusive of 5% contains 50 of tax and 1,000 of net.

The mistake that costs money is treating a gross figure as net. Taking 5% of 1,050 gives 52.50, not 50, and if you have quoted a client an inclusive price and then invoiced tax on top of it, you are the one absorbing the difference.

Where you are registered, show the net amount, the tax rate, the tax amount as a separate line and the gross total, along with your tax registration number. A registered buyer generally cannot reclaim tax from a document that does not break it out, which means the invoice comes back to you.

Whether you charge tax at all on a given sale — particularly on exports of services or to a client in another country — is a jurisdiction question rather than a formatting one. Ask once per client country and then encode the answer in how you issue.