VAT Glossary

Net price

The price before VAT is added. VAT is calculated as a percentage of this amount, which is why backwards calculations divide rather than subtract. Also called the VAT-exclusive price.

Gross price

The price after VAT is added — what the customer actually pays. Business-to-consumer prices are normally displayed gross; business-to-business quotes are often net with VAT shown separately.

Output VAT

VAT you charge on your own sales. You collect it from customers and pass it to the tax authority through your return. Example: a £100 net sale at 20% creates £20 of output VAT.

Input VAT

VAT charged to you on business purchases. If you are VAT-registered, you generally reclaim it by deducting it from the output VAT you owe — the reason the system is called a value added tax.

Standard rate

The default VAT rate in a country, applied to most goods and services. It ranges across Europe from 17% (Luxembourg) to 27% (Hungary); more than half of EU members are at 20–23%.

Reduced rate

One or more lower rates for specific categories such as food, books, transport or hospitality — for example 5% in the UK, 7% in Germany, 10% in France and Spain. Categories differ by country, so the same item can be taxed differently across a border.

Zero-rated

A rate of 0% applied to specific supplies (many foods, children's clothes, exported goods). Crucially, zero-rated is still a taxable supply: the seller can usually reclaim related input VAT. Exports are commonly zero-rated.

Exempt

Supplies outside the scope of VAT (many financial and healthcare services, for example). No VAT is charged, but — unlike zero-rated — businesses usually cannot reclaim input VAT linked to exempt supplies. Zero-rated and exempt are not the same thing.

Reverse charge

A rule that shifts the duty to account for VAT from the supplier to the customer — used mainly for cross-border business-to-business services and some domestic sectors (such as UK construction). The supplier invoices without VAT and notes the reverse charge; the customer accounts for it on their return. See the reverse charge guide.

Place of supply

The rules that decide where a sale is taxed. For services to consumers this is usually the customer's country; for business-to-business services it is typically the customer's country too — which is why cross-border sellers must track it carefully.

VAT number (VAT ID)

The registration identifier a business shows on invoices. In the EU, VAT numbers can be checked against the VIES database; invoices to businesses normally must show both parties' numbers for the reverse charge to apply.

VAT return

The periodic statement reporting output VAT, input VAT and the net amount due to (or repayable by) the tax authority. Frequency varies — often monthly, bi-monthly or quarterly depending on country and turnover.

One Stop Shop (OSS)

An EU scheme letting businesses selling cross-border to consumers report and pay VAT for all member states through a single quarterly return, instead of registering in each country.

IOSS

The Import One Stop Shop: the equivalent single-return scheme for goods shipped from outside the EU in consignments of €150 or less.

Acquisition VAT

VAT a business self-assesses on goods acquired from another EU country (or on imports), mirroring the reverse charge for goods.

Margin scheme

A special method for second-hand goods, art and antiques where VAT is calculated on the profit margin rather than the full selling price.

CGST, SGST and IGST (India)

The three components of Indian GST: sales within a state split into CGST (central) and SGST (state); sales across states are charged as a single IGST at the same combined rate.

GST

Goods and Services Tax — the same mechanism as VAT under a different name, used in India, Australia, New Zealand, Canada and Singapore.

Last reviewed: 16 October 2026 · Definitions are provided for orientation, not tax advice — check the official authority for your case. Methodology · Editorial standards · Report an error