Looking to sort out http://callietimothy.com/ - What is VAT Value Added Tax (VAT) is a type of consumption tax ?
Businesses and consumers are charged with various forms of taxes and it is important to understand what we are being taxed for. Value Added Tax (VAT) is a type of consumption tax which is levied on different kinds of goods and services provided to consumers. Most of the revenue generated by businesses for the provision of goods and services are subject to tax. Therefore, the taxable portion of sales will be remitted to the Government in the form of VAT and other taxes for inputs and raw materials. For VAT, the tax is fully bared by the final consumers of the goods. Due to its importance as a major source of national income, most of the countries around the globe impose VAT, or similar form of taxes, on end consumers.
What is VAT and when is VAT charged? VAT is levied on most business transactions and dealings across the entire value chain of the goods. In order to explain VAT better, let us use the example of a chocolate company. In the first stage of the value chain, the supplier will provide cocoa powder and other raw materials to the chocolate manufacturer. The cocoa powder will be sold for a profit which is inclusive of VAT to the manufacturer. The manufacturer then makes the chocolates and sells it to the retailer for a profit which also includes VAT. At the retail outlet or at shopping centers, retailers make the final stage of sales to the consumers. The final price of the product - which the consumer pays for - includes the payment for the chocolate and the total sum of VAT from the supplier right up to the user. Based on this example, we can see that VAT is paid by the final customers. Each entity in the value chain is required to remit their portion of VAT tax over to the Government.
VAT rates and the categories of goods and services charged with VAT vary across the different nations. In the United Kingdom and some of its neighboring countries in the European Union, the standard VAT rate is 20 percent. But for certain categories of goods and service, a reduced VAT rate of 5 percent or a zero VAT rate of 0 percent might apply. Domestic fuel, sanitary hygiene goods and energy-saving equipment are charged with a 5 percent VAT rate. Newspapers, books, certain types of food and public transportation qualify for the 0 percent VAT rate. Certain goods and services are wholly exempted from VAT. This category of goods and services include education, insurance, medical treatment and fundraising.
After understanding the basics of VAT, we are sure that you will have further questions about the topic. Other common questions regarding VAT includes the business registration for VAT, VAT payment and refunds and also VAT related notices, forms and application guidelines. VAT is a complicated tax matter for most people to understand. To read up more or to get professional help in regards to VAT, get in touch with your local tax agent or search for more information online.
Article Source: http://EzineArticles.com/7212769
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