Value Added Tax (VAT)

Value Added Tax is an indirect sales or consumption tax levied on most goods and services and payable by consumers and businesses. Businesses whose turnover is below a cap set by each tax authority will generally be exempt from charging their customers VAT. Above that cap, charging VAT is compulsory. Every time a consumer good is purchased (outside the small exemptions list) VAT is charged. VAT is passed from the person or entity charging it to tax authorities – less the VAT they have paid out – to avoid double taxation and ensuring tax is only paid on the value-added at each stage of production and distribution.