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Profit margin calculator with VAT

Know what you really make on every sale. Enter your selling price, your product cost and the other costs of each order, such as shipping, packaging and marketplace fees, and this calculator shows your profit, margin and markup with VAT handled correctly. It also works backwards: give it the margin you want and it tells you what to charge.

Quick answer

Profit margin is profit divided by the selling price before VAT: a price of 100 with total costs of 70 is a 30% margin and a 42.9% markup. Enter your price, product cost, shipping, packaging and fees below to see your profit, margin and markup, or enter a target margin to get the price to charge.

What you pay for the item, excluding VAT you can recover.

Shipping, packaging, marketplace or payment fees, ad cost per order.

Enter a selling price and a product cost to see your profit, margin and markup.

Price for a target margin

Enter your costs and a margin below 100% to see the price you need.

Costs are treated as excluding VAT, as for a VAT-registered seller who recovers VAT on purchases. Results are estimates; income tax and overheads are not included.

How to use the Profit Margin Calculator

  1. Enter your selling price and choose the VAT rate on your sales. Tick the box if the price already includes VAT.
  2. Enter the product cost per unit and any other costs per sale.
  3. Read your profit, margin and markup on the right.
  4. Set a target margin to see the selling price you need, before and after VAT.

Margin vs markup: the difference that costs sellers money

Margin is profit as a share of the selling price. Markup is profit as a share of the cost. If an item costs 60 and sells for 100 before VAT, the profit is 40, the margin is 40% and the markup is 66.7%. Many sellers add a 30% markup and think they earn a 30% margin, but a 30% markup is only a 23% margin. Fees and discounts are taken from the price, so margin is the number to watch when you set prices and compare products.

Why VAT is not your profit

If you are VAT-registered, the VAT your customer pays belongs to the tax authority, not to you. In the UAE a price of AED 105 including 5% VAT is AED 100 of revenue and AED 5 of VAT you pay over. In Saudi Arabia, at 15%, the gap is wider. This calculator takes the VAT out first and works out the margin on your real revenue. On the cost side, a registered seller can usually recover the VAT on purchases, so costs are entered without VAT. If you are not registered, choose "No VAT" and enter your costs as you pay them.

Count every cost of a sale

Online sellers often look at product cost alone and miss the costs that come with each order: delivery and cash-on-delivery charges, packaging, marketplace commission, payment gateway fees, returns and the advertising it took to win the order. Add these per sale in "Other costs" for a true picture. A product that looks like a 50% margin on paper can be close to break-even after fees and ads, and it is better to know that before you scale it.

Frequently asked questions

How do I calculate profit margin?

Profit margin = (selling price excl. VAT − total cost) ÷ selling price excl. VAT × 100. For a price of 100 and costs of 70, the margin is 30%.

What is a good profit margin for e-commerce?

It depends on the category. Many online sellers aim for a gross margin of 30% to 50% after product and delivery costs, so there is room left for ads, returns and overheads. Very low margins leave little space for mistakes.

How do I find the price for a target margin?

Divide your total cost by (1 − target margin). With costs of 70 and a 30% target, the price is 70 ÷ 0.7 = 100 before VAT. The calculator does this for you and adds VAT.

Should I include VAT in my costs?

If you are VAT-registered and can recover input VAT, enter costs without VAT. If you are not registered, the VAT you pay is a real cost, so include it and choose "No VAT" for your sales.

Does this include income or corporate tax?

No. It shows profit per sale before overheads such as rent and salaries, and before any corporate or income tax.

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