What is value-added tax?
Q: What is value-added tax?
A: Value-added tax, also known as VAT or V.A.T., is a tax added to the price of goods and services sold in the European Union.
Q: How is VAT similar to a sales tax in the US?
A: VAT is similar to a sales tax in the US in that it is an additional tax on the sale of goods and services.
Q: Who pays VAT?
A: The maker of the goods pays VAT to the government, the wholesaler pays VAT to the government minus the tax paid to the maker, and the shop pays VAT to the government minus the tax paid to the wholesaler. Ultimately, the customer pays the full amount of VAT.
Q: Does everyone have to pay VAT?
A: Yes, every business or person involved in the sale of goods or services must charge VAT and have an invoice to show they have paid some tax.
Q: Is VAT added to all products?
A: No, VAT is not added to all products. Children's books and clothes are exempt from VAT.
Q: Why do some companies charge VAT on services?
A: Some companies provide services rather than goods, but may still charge VAT on their services. For example, a garage-owner might charge VAT on the cost of fitting spare parts into a customer's car.
Q: Is VAT easy to calculate?
A: No, VAT can be complicated to calculate because every business or person involved in the sale of goods or services must charge the tax and have an invoice to show they have paid some tax.
