Knowlopedia
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Value Added Tax (VAT) is a type of consumption tax that is placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.
VAT applies to most goods and services that are bought and sold for use or consumption in an economy. It does not apply to items such as financial services or certain food products like basic groceries.
The rate for VAT varies depending on country, but it typically ranges between 15-25%. In some countries, there may be multiple rates based on different types of goods and services. For example, in some countries there may be reduced rates applied to essential items such as food or medical supplies.
When businesses purchase goods and services from other businesses they can reclaim any VAT paid out by claiming it back through their own tax return process. This helps reduce costs for businesses which can then be passed onto consumers through lower prices for products and services.
Businesses must register with their local government authority if they meet certain criteria such as having annual sales over a certain threshold amount or providing taxable goods/services within a particular jurisdiction. Once registered, businesses must charge customers applicable VAT rates when selling taxable goods/services and submit periodic returns detailing all transactions subject to VAT along with payment due to government authorities.
VAT has become one popular form taxation around world due its simplicity compared other forms taxation like income taxes which require more complex calculations deductions etc.. It also provides governments steady stream revenue without burdening citizens directly since burden falls primarily business owners who collect pass along cost consumers via higher prices products/services purchased them
VAT applies to most goods and services that are bought and sold for use or consumption in an economy. It does not apply to items such as financial services or certain food products like basic groceries.
The rate for VAT varies depending on country, but it typically ranges between 15-25%. In some countries, there may be multiple rates based on different types of goods and services. For example, in some countries there may be reduced rates applied to essential items such as food or medical supplies.
When businesses purchase goods and services from other businesses they can reclaim any VAT paid out by claiming it back through their own tax return process. This helps reduce costs for businesses which can then be passed onto consumers through lower prices for products and services.
Businesses must register with their local government authority if they meet certain criteria such as having annual sales over a certain threshold amount or providing taxable goods/services within a particular jurisdiction. Once registered, businesses must charge customers applicable VAT rates when selling taxable goods/services and submit periodic returns detailing all transactions subject to VAT along with payment due to government authorities.
VAT has become one popular form taxation around world due its simplicity compared other forms taxation like income taxes which require more complex calculations deductions etc.. It also provides governments steady stream revenue without burdening citizens directly since burden falls primarily business owners who collect pass along cost consumers via higher prices products/services purchased them
