VAT for Beginners provides basic VAT information to clients non-familiar with the VAT concept.

VAT is a consumption tax and is meant to burden the final consumers. Thus, VAT should be neutral for the business by definition.

VAT is due on both goods and services supplies.

In contrast to the sale tax which is due only once upon purchase by the end consumer, VAT is levied by the business during each phase of the production process. Generally, taxable persons levy VAT on their output supplies and at the same time use VAT credit for their input supplies. As a result, VAT is levied on the value accumulated through each production phase.

In addition to the general taxable supplies there may be: reduced rates for certain supplies, zero rated supplies, exempt supplies as well as transactions out of the VAT scope.

When starting business or having a business partner from a country providing for VAT you should check, preferably in advance, for possible VAT obligations of your company or unexpected costs due to VAT chargeable in the respective state.

Basic VAT terms: taxable event, taxable base, place of supply, VAT registration, VAT deduction, invoice, VAT return, sale and purchase ledgers