The Basics of VAT
March 4, 2020
The consumption tax is assessed and placed on every product also known as Value Added Tax, or VAT. This applies to almost every sale of goods and services that are sold for use or consumption in the European Union. It’s added to an item at every point of the supply chain where value is added, and it’s paid by the end customer rather than the business offering them. Normally, things that are made for export or services sold abroad are not subject to VAT. Overall, VAT can be beneficial as stores can make back some of the money they paid by doing a VAT submission, though they have to be registered for it.
Every sale has a certain VAT due, which is the percentage of the sale price. With it, the taxable entity is allowed to deduct all the tax that was already paid previously. Only the taxes that were added at each production and distribution stage need to be paid, thus avoiding double taxation. The final VAT due is the sum of the values added at each preceding stage.
When doing a VAT submission, registered traders have a specific number and need to present how much VAT was charged to customers on invoices. Then registered clients can see how much tax they paid on the final product by seeing how much they can deduct.
This is a tax form that needs to be filed along the fiscal year and it shows the amount of VAT that is due. It records such things as:
Even if there is no VAT to pay or reclaim, businesses are still required to file a VAT submission.
Known as Economic Operations Registration and Identification number and is given to businesses in the EU that import and export goods into the union. If an individual or company wants to do customs activities in Europe, they have to get it from their national customs authority. And, if a non-EU entity intends to lodge customs, entry or exit summary declarations, they also need to obtain this number.
It moves the responsibility for the reporting of VAT transactions from the seller to the buyer. This way, stores don’t need to register for a VAT submission in the country the goods were shipped to if they are not based there. Although, if VAT is charged on the costs related to the products, they can be returned through an EU VAT reclaim.
In the end, registering for VAT is quite beneficial for businesses. It adds to the credibility and trustworthiness of a company and allows to reclaim taxes from products and services that were purchased for the corporation. So, if you have certain equipment, machinery or IT, you may be able to get some money back. One just should remember to keep accurate records and submit the appropriate returns.