Posted by: admin : Category: A Value Added Tax is a form of sales tax. Its key distinguishing feature is that it is charged even on business to business transactions. However, businesses are usually entitled to refunds on value added tax which they have paid on products which could be regarded as inputs to their own business process. Typically, businesses keep careful records of all their transactions and apply for refunds to the government, if they are owed one, on a periodic basis, usually quarterly. If the company sells a large volume of products to consumers rather than businesses, it is possible that the company, on a net basis, will owe the government money rather than the other way around.
Value Added Tax is a major component of taxation in most European countries. In France, where the tax was first invented, it is, in fact, the principal means of raising revenue for the government.
Rates differ between countries but typically value added tax is charged at between 10-25% of the value of a sale. Governments often levy value added tax at a reduced rate on some goods and, in a few cases, goods may be exempt from it entirely.
Sometimes businesses quote product prices in which value added tax has already been factored in; sometimes the VAT amount is shown only when the sale is processed.