Why 20% VAT Is Only 16.7% of What You Paid

To calculate a VAT refund from a gross price, multiply the price by rate ÷ (1 + rate). Not by the rate. At France’s 20% that is 16.67%, so €100 on the tag contains €16.67 of tax, not €20. Anyone who multiplies the tag price by the headline rate overstates their refund by 20% of itself before an operator has taken anything at all.

This is the most common arithmetic error in tax-free shopping and it is not the shopper’s fault. In the United States, sales tax is added at the till: the shelf says $100, the register says $108.75, and the tax is visibly on top. Everywhere that runs a VAT system, the tag is the price. The tax is already inside it. The habit that works at home produces the wrong number abroad, every time, in the same direction.

How to calculate a VAT refund from a gross price

VAT is charged on the pre-tax price. So the price you see is:

gross = net × (1 + rate)

Turn that around to get the tax back out of a gross figure:

VAT inside = gross × rate ÷ (1 + rate)

At a 20% rate: 0.20 ÷ 1.20 = 0.1667. Multiply €100 by that and you get €16.67. Check it forwards — €83.33 net, plus 20% of €83.33 (€16.67), is €100.00.

The shorthand worth carrying: the fraction of a gross price that is tax is always smaller than the rate, and the higher the rate, the bigger that gap becomes in absolute terms.

Doing it in your head

Two of the common rates collapse to clean fractions, which is worth memorising because you will want this standing in a shop rather than sitting with a calculator.

At a 20% rate, divide the tag by six. 20/120 is exactly one sixth, so €1,200 contains €200 of tax and €90 contains €15. At a 25% rate, divide by five — 25/125 is exactly one fifth. Those two are not approximations; they are the same number written differently.

For the rates in between, one sixth is a decent working estimate that errs slightly low at 22% and slightly high at 19%, which is the right direction to be wrong in. If the shop’s figure is far above your sixth, you have been quoted the tax rate rather than the refund.

The ceiling at three purchase sizes

The fraction is constant, so the ceiling scales exactly with what you spend. At France’s 20%:

The right-hand column applies Privé’s published quarter-of-the-reclaimable-amount fee and is there to show that the proportion does not improve with size. A bigger purchase does not buy a better rate; it buys a bigger absolute refund at the same percentage. What changes with size is only whether the queueing is worth it.

What that fraction is, country by country

Standard rates below are Tax Foundation’s EU rate table, as of January 2026, drawn from the European Commission’s Taxes in Europe Database. The right-hand column is the arithmetic above applied to each one.

Two things fall out of that table that are worth more than the individual rows.

The first is that Sweden’s 25% is the only rate where the gross fraction is a round number — 25/125 is exactly 20%. It is a useful sanity anchor: if your mental arithmetic ever tells you a 25% rate returns 25%, the table above says it returns 20%.

The second is that the gap between the headline and the reclaimable fraction grows with the rate. At 17% the gap is 2.47 points; at 27% it is 5.74 points. So the countries where a shopper is most likely to expect a large refund are exactly the countries where the headline overstates it most.

The error compounds when a fee is taken on top

The formula above gives the ceiling. It is what would land in your account if the refund were free, and it never is. An operator takes a fee out of that €16.67, and depending on which published figure you use, between €1.67 and €5.00 of it — four published figures for the operator's fee, reconciled works through why those figures look irreconcilable and mostly are not.

Which means someone who starts by multiplying the tag by the headline rate makes two overstatements in sequence: they begin at €20 instead of €16.67, and then they do not subtract a fee. The gap between the €20 they expected and the roughly €12.50 that actually arrives is where the phone calls come from. I took four years of those calls, and almost none of them were about a rule. They were about this multiplication.

Working it the other way: what a shop’s “tax-free price” means

Some shops in tourist districts quote a “tax-free price” on the tag or beside it. That is the net figure — €83.33 in the example above — and it is the price the item would cost if you were never charged the tax in the first place.

You will not pay that price. You pay €100 at the till and claim afterwards, and what comes back is the €16.67 minus the operator’s fee. So a tag showing €100 next to “€83.33 tax free” is describing a €16.67 gap that you can capture a portion of, not a discount you can walk out with. In the handful of schemes where the shop does deduct at the register, you still normally pay a fee, and the item still has to clear customs validation on your way out or the shop can charge the tax back.

The test that settles it: ask what you will receive in currency, not what rate applies. A figure in euros on a form is a fact. A percentage is an invitation to do this multiplication wrong.

What this does not tell you

The fraction above is a ceiling, not a forecast. Four things sit between it and your account:

1. A minimum spend, usually at one retailer on one day. Below it the answer is zero at any rate.
2. The operator’s fee, which the ceiling deliberately ignores.
3. Customs validation. Without the stamp there is no refund, whatever the arithmetic says.
4. Eligibility. These schemes are for non-residents exporting goods, and the goods normally have to leave with you.

The whole expression — this ceiling, the fee, the conversion, the duty on the way home and the warranty that stops at a border — is worked end to end in what a VAT refund actually pays.

Rates checked 3 September 2026 and quoted as of January 2026. Rules are jurisdictional and they change; this is reporting, not tax or legal advice.

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