Misplaced Pages

#275724

82-666: The European Union value-added tax (or EU VAT ) is a value added tax on goods and services within the European Union (EU). The EU's institutions do not collect the tax, but EU member states are each required to adopt in national legislation a value added tax that complies with the EU VAT code. Different rates of VAT apply in different EU member states, ranging from 17% in Luxembourg to 27% in Hungary. The total VAT collected by member states

164-635: A value added tax identification number . The Thirteenth VAT Directive, adopted in 1986, allows businesses established outside the EU to recover VAT in certain circumstances. In 2006, the Council sought to improve on the Sixth Directive by recasting it. The recast of the Sixth Directive retained all of the legal provisions of the Sixth Directive but also incorporated VAT provisions found in other Directives and rearranged text order to make it more readable. In addition,

246-735: A HST may have a Provincial Sales Tax (PST), which are collected in British Columbia (7%), Manitoba (7%) and Saskatchewan (6%). Alberta and all three territories do not collect either a HST or PST. VAT was introduced in Chile in 1974 under Decreto Ley 825. From 1998 there was implemented a 18% tax. Since October 2003, the standard VAT rate has been 19%, applying to the majority of goods and some services. However certain items have been subjected to additional tax, for instance, alcoholic beverages (between 20.5= – 31.5% for fermented to distilled products), jewellery (15%), pyrotechnic items (50% or more for

328-497: A VAT Trustee if they: register and collect a Business Identification Number (BIN) from the NBR; submit VAT returns on time; offer VAT receipts; store all cash-memos; and use the VAT rebate system responsibly. VAT Mentors work in the VAT or Customs department and deal with trustees. The VAT rate is a flat 15%. VAT was introduced on 1 January 1997 and replaced 11 other taxes. The original rate of 15%

410-501: A business below the margin of profitability. The effect can be seen when VAT is cut or abolished. Sweden reduced VAT on restaurant meals from 25% to 12.5%, creating 11,000 additional jobs. VAT offers distinctive opportunities for evasion and fraud, especially through abuse of the credit and refund mechanism. VAT overclaim fraud reached as high as 34% in Romania. Exports are generally zero-rated , creating opportunity for fraud. In Europe,

492-456: A decade, it was imposed only on certain categories of goods and at differing rates. In 1994, VAT became universally imposed on production, wholesale, retain, and importation of all goods. In 2016, business tax was replaced with VAT nationwide. VAT's significance to China's tax revenues increased drastically after this. In 1993, a standard rate of 23% and a reduced rate of 5% for non-alcoholic beverages, sewerage, heat, and public transport

574-476: A duty to make their anti-abuse laws and rules compliant with the ECJ decisions, besides to retroactively re-characterize and prosecute transactions which meet those ECJ criteria. The accrual of an undue tax advantage may be even found under a formal application of the Sixth Directive and shall be based on a variety of objective factors highlighting that the "organization structure and the form transactions" freely chosen by

656-437: A final consumer), the supplier must generally charge VAT at the rate applicable in its own member state. If the place of supply is outside the EU, no VAT is charged. Goods imported from non-member states are subject to VAT at the rate applicable in the importing member state, whether or not the goods are received for consideration and the importer. VAT is generally charged at the border, at the same time as customs duty and uses

738-418: A legacy of pre-EU legislation (permitted by Article 110). These member states have been granted a derogation to continue existing zero-rating but are not permitted to add new goods or services. An EU member state may uplift their domestic zero rate to a higher rate, for example to 5% or 20%; however, EU VAT rules do not allow a reversal back to the zero rate once it has been given up. Member states may institute

820-410: A lower rate to products that are more likely to be consumed by the poor. Some countries compensate by implementing transfer payments targeted to the poor. The incidence of VAT may not fall entirely on consumers as traders tend to absorb VAT so as to maintain sales volumes. Conversely, not all cuts in VAT are passed on in lower prices. VAT consequently leads to a deadweight loss if cutting prices pushes

902-551: A principal company and its subsidiaries , and should register jointly for VAT purposes. VAT does not need to be levied on the costs of transactions undertaken within the group. Article 11 reads: After consulting the advisory committee on value added tax (hereafter, the ‘VAT Committee’), each Member State may regard as a single taxable person any persons established in the territory of that Member State who, while legally independent, are closely bound to one another by financial, economic and organisational links. A Member State exercising

SECTION 10

#1733085098276

984-412: A product charge the VAT and the customer pays it. When the customer is a business, the VAT is known as an "input VAT." When a consumer purchases the end product from a business, the tax is called the "output VAT." A value-added tax collected at each stage in the supply chain is remitted to the tax authorities of the member state concerned and forms part of that state's revenue. A small proportion goes to

1066-414: A reduced rate of 12%. Goods and services were redistributed among different tax rates. There was only one services that shifted from the standard rate to the reduced rate and that were non-regular land passenger bus services. These are not taxi services, which apply a VAT rate of 21%. Books and printed materials, including electronic books, were zero rated. Several services were moved from reduced rates to

1148-606: A reduced rate on a previously zero-rated item even where EU law does not provide for a reduced rate. On the other hand, if a member state makes an increase from a zero-rate to the prevalent standard rate, they may not decrease to a reduced rate unless specifically provided for in EU VAT Law (the Annex III of 2006/112/EC list sets out where a reduced rate is permissible). Value added tax A value-added tax ( VAT or goods and services tax ( GST ), general consumption tax ( GCT ))

1230-490: A single unit for purposes related to the collection and payment of VAT. Article 11 of the Directive permits member states to decide whether to allow groups of closely linked companies or organisations to be treated as a single "taxable person", and if so, also to implement its own measures decided to combat any associated tax avoidance or evasion arising from misuse of the provision. The group members must be 'closely related' e.g.

1312-432: A taxable transaction within the EU VAT scheme as a transaction involving the supply of goods, the supply of services, and the importation of goods. The Eighth Directive, adopted in 1979, focuses on harmonising the legislation of the member states with respect to turnover taxes—provisions on the reimbursement of value added tax to taxable persons not established on the territory of the country (the provisions of this act allow

1394-440: A taxpayer of one member state to receive a VAT refund in another member state). Businesses can be required to register for VAT in EU member states other than the one in which they are based if they supply goods via mail order to those states over a certain threshold. Businesses established in one member state but receive supplies in another member state may be able to reclaim VAT charged in the second state. To do so, businesses have

1476-459: A vendor in one member state sells goods directly to individuals and VAT-exempt organisations in another member state and the aggregate value of goods sold to consumers in that member state is below €100,000 or €35,000 (or the equivalent) in any 12 consecutive months, that sale of goods may qualify for a distance sales treatment. Distance sales treatment allowed the vendor to apply domestic place of supply rules for determining which member state collects

1558-581: Is a VAT introduced in Australia in 2000. Revenue is redistributed to the states and territories via the Commonwealth Grants Commission process. This works as a program of horizontal fiscal equalisation . The rate is set at 10%, although many domestically consumed items are effectively zero-rated (GST-free) such as fresh food, education, health services, certain medical products, as well as government charges and fees that are effectively taxes. VAT

1640-440: Is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared with, a sales tax . VAT is an indirect tax , because the consumer who ultimately bears the burden of the tax is not the entity that pays it. Specific goods and services are typically exempted in various jurisdictions. Products exported to other countries are typically exempted from

1722-509: Is a national sales tax introduced in 1991 at a rate of 7%, later reduced to 5%. A Harmonized Sales Tax (HST) that combines the GST and provincial sales tax, is collected in New Brunswick (15%), Newfoundland (15%), Nova Scotia (15%), Ontario (13%) and Prince Edward Island (15%), while British Columbia had a 12% HST until 2013. Quebec has a de facto 14.975% HST: it follows the same rules as

SECTION 20

#1733085098276

1804-413: Is a taxable transaction for consideration crossing two or more member states. The place of supply is determined to be the destination member state, and VAT is normally charged at the rate applicable in the destination member state; however there are special provisions for distance selling (see below ). The mechanism for achieving this result is as follows: the exporting member state does not collect VAT on

1886-1184: Is considered a form of fraud. BTW-nr Mwst-nr The check digits are calculated as 97 - MOD 97 The French key is calculated as follow : Key = [ 12 + 3 * ( SIREN modulo 97 ) ] modulo 97, for example  : Key = [ 12 + 3 * ( 404,833,048 modulo 97 ) ] modulo 97 = [12 + 3*56] modulo 97 = 180 modulo 97 = 83 so the tax number for 404,833,048 is FR 83,404,833,048 source from : www.insee.fr 'IE' + 7 digits and two letters, e.g. IE1234567FA (since January 2013, see [1] ) 'IE'+one digit, one letter/"+"/"*", 5 digits and one letter (old style, currently being phased out, see [2] ) (IVA = Imposta sul Valore Aggiunto) For individual people / freelancers, its either 'ES'+8 digits+letter (for Spaniards) or 'ES'+letter+7 digits+letter (for foreigners). e.g. ESX9999999R fǎrén hé qítā zǔzhī tǒngyī shèhuì xìnyòng dàimǎ Unified Social Credit Identifier tǒngyī shèhuì xìnyòng dàimǎ (Hiragana: ほうじんばんごう) hōjin bangō Corporate Number PIN= personal identification number ЖСН – жеке сәйкестендіру нөмірі ЖСН (PIN) tǒngyī biānhào Uniform serial number tǒngbiān A checksum can be computed by multiplying each digital by

1968-533: Is entitled. For example, a book manufacturer in Ireland who purchases paper including VAT at the 23% rate and sells books at the 0% rate is entitled to reclaim the VAT on the purchase of paper, as the business is making taxable supplies. In countries like Sweden and Finland, non-profit organisations such as sports clubs are exempt from all VAT, and have to pay full VAT for purchases without reimbursement. Additionally, in Malta,

2050-433: Is established (or "belongs"), such as a fixed establishment where the service is supplied, the supplier's permanent address, or where the supplier usually resides. VAT is charged at the rate applicable in and collected by the member state where the place of supply of the services is located. This general rule for the place of supply of services (the place where the supplier is established) is subject to several exceptions if

2132-403: Is input-output based. Producers are allowed to subtract VAT on their inputs from the VAT they charge on their outputs and report the difference. VAT is purchased quarterly. An exception occurs for taxpayers who state monthly payments. VAT is disbursed to the state's budget on the 20th day of the month after the tax period. The law took effect on January 1, 2022. The goods and services tax (GST)

2214-451: Is required to charge VAT at the rate applicable in the importing member state. If a supplier provides a distant sales service to several EU member states, a separate accounting of sold goods in regards to VAT calculation was required. The supplier must then seek a VAT registration (and charge applicable rate) in each country where the volume of sales in any 12 consecutive months exceeds the local threshold. A special threshold amount of €35,000

2296-545: Is that VAT is collected at the national level, while in countries such as India and the US, sales tax is collected at the point of sale by the local jurisdiction, leading them to prefer the latter method. The main disadvantage of VAT is the extra accounting required by those in the supply chain. However, payment of VAT is made simpler when the VAT system has few, if any, exemptions (such as with GST in New Zealand). 10% sales tax: So,

2378-482: Is the greatest contributing factor to the US current account deficit , and estimated this disadvantage to US producers and service providers to be $ 518 billion in 2008 alone. US politicians such as congressman Bill Pascrell , advocate either changing WTO rules relating to VAT or rebating VAT charged on US exporters. A business tax rebate for exports was proposed in the 2016 GOP tax reform policy paper. The assertion that this "border adjustment" would be compatible with

2460-670: Is used as part of the calculation to determine what each state contributes to the EU's budget . German industrialist Wilhelm von Siemens proposed the concept of a value-added tax in 1918 to replace the German turnover tax however, the turnover tax was not replaced until 1968. The modern variation of VAT was first implemented by Maurice Lauré , joint director of the French tax authority, who implemented VAT on 10 April 1954 in France's Ivory Coast colony. Assessing

2542-403: Is used for the 12-digit scheme, ignoring the extra 3-digit block). The current modulus-97 series ran out during 2010, so a parallel series of numbers was introduced from November 2009 for new registrations, restarting at 100  nnnn nn and following the same format but with the last two digits derived from an alternative algorithm known as "9755". The algorithm is identical to the one for

European Union value added tax - Misplaced Pages Continue

2624-616: The EU VAT area and specifies that VAT rates must be above a certain limit. It has several basic purposes: The VAT directive is published in all EU official languages. In 1977, the Council of the European Communities sought to harmonise the national VAT systems of its member states by issuing the Sixth Directive to provide a uniform basis of assessment and replacing the Second Directive promulgated in 1967. The Sixth Directive defined

2706-462: The United States . German industrialist Wilhelm von Siemens proposed the concept of a value-added tax in 1918 to replace the German turnover tax . However, the turnover tax was not replaced until 1968. The modern variation of VAT was first implemented by Maurice Lauré , joint director of the French tax authority, who implemented VAT on 10 April 1954 in France's Ivory Coast colony. Assessing

2788-440: The customs union , the differing VAT rates and the separate VAT administration processes resulted in a high administrative and cost burden for cross-border trade. For private individuals (not registered for VAT) who transport to one member state goods purchased while living or traveling in another member state, the VAT is normally payable in the state where the goods were purchased, regardless of any differences in VAT rates between

2870-505: The EEC, following which, other member states (initially Belgium, Italy, Luxembourg, the Netherlands and West Germany) introduced VAT. As of 2020, more than 160 countries collect VAT. VAT can be accounts-based or invoice-based. All VAT-collecting countries except Japan use the invoice method. Using invoices, each seller pays VAT on their sales and passes the buyer an invoice that indicates

2952-512: The European Union in the form of a levy ("VAT-based own resources"). The co-ordinated administration of value-added tax within the EU VAT area is an important part of the single market . A cross-border VAT is declared in the same way as domestic VAT, which facilitates the elimination of border controls between member states, saving costs and reducing delays. It also simplifies administrative work for freight forwarders . Previously, in spite of

3034-455: The GST, and both are collected by Revenu Québec . Advertised and posted prices generally exclude taxes, which are calculated at the time of payment; common exceptions are motor fuels, the posted prices for which include sales and excise taxes, and items in vending machines as well as alcohol in monopoly stores. Basic groceries, prescription drugs, inward/outbound transportation and medical devices are zero-rated. Other provinces that do not have

3116-645: The Recast Directive codified certain other instruments including a Commission decision of 2000 relating to funding of the EU budget from with a percentage of the VAT amounts collected by each member state. Abuse criteria are identified by the jurisprudence of the European Court of Justice (ECJ) developed from 2006 onwards: VAT cases of Halifax and University of Huddersfield , and subsequently Part Service , Ampliscientifica and Amplifin , Tanoarch , Weald Leasing and RBS Deutschland . EU member states are under

3198-507: The U.K., examples include some food, books, and medications, along with certain kinds of transport. The Directive does provide for very limited mandatory "zero-rates", generally related to supplies if an international nature such as exports and international transportation where the exemptions has a right of deduction (2006/112/EC Article 169). However, generally it was intended that the minimum VAT rate throughout Europe would be 5%. However, zero-rating remains in some member states e.g. Ireland, as

3280-415: The VAT. This allows VAT to be charged at the rate applicable in the exporting member state. However, there are some additional restrictions to be met: certain goods do not qualify (e.g., new motor vehicles), and a compulsory VAT registration is required for a supplier of excise goods such as tobacco and alcohol to the U.K. If sales to final consumers in a member state exceeded €100,000, the exporting vendor

3362-507: The amount of tax paid excluding deductions (input tax). Buyers who themselves add value and resell the product pay VAT on their own sales (output tax). The difference between output tax and input tax is the amount paid to the government (or refunded, in the case of a negative amount). Using accounts, the tax is calculated as a percentage of the difference between sales and purchases from taxed accounts. VAT provides an incentive for businesses to register and keep invoices, and it does this in

European Union value added tax - Misplaced Pages Continue

3444-457: The apparent revenue is churned – i.e. taxpayers are given the money to pay the tax, reducing net revenue. Refund delays by the tax administration can damage businesses. Compliance costs are seen as a burden on business. In the UK, compliance costs for VAT have been estimated to be about 4% of the yield, with greater impacts on smaller businesses. Under a sales tax system, only businesses selling to

3526-480: The chairmanship of Professor Fritz Neumark made its priority objective the elimination of distortions to competition caused by disparities in national indirect tax systems. The Neumark Report published in 1962 concluded that France's VAT model would be the simplest and most effective indirect tax system. This led to the EEC issuing two VAT directives, adopted in April 1967, providing a blueprint for introducing VAT across

3608-481: The code XI when trading with the EU) and then has between 2 and 13 characters. The identifiers are composed of numeric digits in most countries, but in some countries they may contain letters. Foreign companies that trade with private individuals and non-business organisations in the EU may have a VATIN starting with "EU" instead of a country code, e.g. Godaddy EU826010755 and Amazon ( AWS ) EU826009064. From 1 January 2020,

3690-493: The consumer pays 10% ($ 0.15) extra, compared to the no taxation scheme, and the government collects this amount. The retailers pay no tax directly, but the retailer has to do the tax-related paperwork. Suppliers and manufacturers have the administrative burden of supplying correct state exemption certifications that the retailer must verify and maintain. The manufacturer is responsible for ensuring that their customers (retailers) are only intermediates and not end consumers (otherwise

3772-421: The corresponding digit in 12121241, adding the totals together (with two-digit totals treated as separate digits, e.g. a 9 in the 7th digit times 4 would result in 36 which would then become 3+6), and dividing the final sum by 10. For the 9-digit scheme, the 2-digit block containing the 8th and 9th digits is always in the range 00 to 96 and is derived from a weighted modulus-97 check number (an identical algorithm

3854-438: The customer is located, and an alternative approach is therefore under negotiation where VAT is charged at the rate of the member state where the purchaser is located. There is a distinction between goods and services which are exempt from VAT and those which are subject to 0% VAT. The seller of exempt goods and services is not entitled to reclaim input VAT on business purchases, whereas the seller of goods and services rated at 0%

3936-573: The end-user are required to collect tax and bear the accounting cost of collecting the tax. Under VAT, manufacturers and wholesale companies also incur accounting expenses to handle the additional paperwork required for collecting VAT, increasing overhead costs and prices. The American Manufacturing Trade Action Coalition in the United States consider VAT charges on US products and rebates for products from other countries to be an unfair trade practice . AMTAC claims that so-called "border tax disadvantage"

4018-518: The established series except that 55 is subtracted to give the check number (modulus 97), so the check number is either 55 less than or (if this would be negative) 42 greater than the check number that a VAT number in the established series would have if it were identical in the first seven digits. The details of the 97−55 check algorithm were to be secret but are now available from HMRC on request. The GD and HA formats may also be formatted as GB888 8 xxx yy for EU compatibility, where xxx

4100-479: The expanded application is zero VAT for many operations and transactions. That zero VAT is the source of controversies between its trading partners, mainly Russia, which is against the zero VAT and promotes wider use of tax credits. VAT is replaced with fixed payments, which are utilized for many taxpayers, operations, and transactions. Legislation is based largely on the EU VAT Directive's principles. The system

4182-661: The experiment as successful, France introduced it domestically in 1958. Following creation of the European Economic Community in 1957, the Fiscal and Financial Committee set up by the European Commission in 1960 under the chairmanship of Professor Fritz Neumark made its priority objective the elimination of distortions to competition caused by disparities in national indirect tax systems. The Neumark Report published in 1962 concluded that France's VAT model would be

SECTION 50

#1733085098276

4264-422: The experiment as successful, France introduced it domestically in 1958. Initially directed at large businesses, it was extended over time to include all business sectors. In France it is the largest source of state finance, accounting for nearly 50% of state revenues. Following creation of the European Economic Community in 1957, the Fiscal and Financial Committee set up by the European Commission in 1960 under

4346-466: The first sale or import) or soft drinks with high sugar (18%). AS of 2023, the VAT tax includes majority of services excluding Education, Health and Transport, as well as taxpayers issuing fee receipts. This tax makes the 41.2% of the total revenue of the country. VAT produces the largest share of China's tax revenue. In 1984 the State Council announced that China would begin collecting VAT. For

4428-428: The form of zero-rated goods and VAT exemption on goods not resold. Through registration, a business documents its purchases, making them eligible for a VAT credit. The main benefits of VAT are that in relation to many other forms of taxation, it does not distort firms' production decisions, it is difficult to evade, and it generates a substantial amount of revenue. VAT has no effect on how businesses organize, because

4510-559: The group are jointly and severally liable for all VAT due. To comply with the rules introduced since 2006, from 1 October 2014, businesses needed to decide if they want to register to use the EU VAT Mini One Stop Shop (MOSS) simplification scheme. If suppliers decided against the MOSS, registration was required in each Member State where business-to-consumer (B2C) supplies of e-services are made. With no minimum turnover threshold for

4592-591: The main source of problems is carousel fraud . This fraud originated in the 1970s in the Benelux countries. VAT fraud then became a major problem in the UK . Similar fraud possibilities exist inside a country. To avoid this, countries such as Sweden hold the major owner of a limited company personally responsible. Because VAT is included in the price index to which state benefits such as pensions and welfare payments are linked in some countries, as well as public sector pay, some of

4674-428: The manufacturer charges the tax). In addition, the retailer tracks what is taxable and what is not, along with the various tax rates in each city where it operates. 10% VAT: In the VAT example above, the consumer has paid, and the government received, the same dollar amount as with a sales tax. At each stage of production, the seller collects a tax and the buyer pays that tax. The buyer can then be reimbursed for paying

4756-437: The new EU VAT rules, VAT registration was required regardless of the value of e-service supply in each Member State. Since 1 July 2021, the MOSS has been extended to B2C goods and turned into a One Stop Shop (OSS): Some goods and services are "zero-rated", though the term is not used in the Directive. The Directive refers to "exemptions" with or without refund of VAT charged at the preceding stage (see 2006/112/EC Article 110). In

4838-494: The option provided for in the first paragraph, may adopt any measures needed to prevent tax evasion or avoidance through the use of this provision. Requirements vary between EU states which have opted to allow VAT groups because the EU legislation provides for member states to determine their own detailed rules for group eligibility and operations. Italian tax legislation permits the operation of VAT Groups, All bodies (whether companies or limited liability partnerships ) within

4920-475: The place of electronically delivered supply of services. The mechanism for collecting VAT when the place of supply is not in the same member state as the supplier is similar to that used for the Intra-Community Acquisitions of goods; zero-rating by the supplier and reverse charge by the recipient of the services for taxable persons. But if the recipient of the services is not a taxable person (i.e.

5002-531: The price at which it is sold increases. VAT has been criticized by opponents as a regressive tax , meaning that the poor pay more, as a percentage of their income, relative to the wealthier individuals, given the higher marginal propensity to consume among the poor. Defenders reply that relating taxation levels to income is an arbitrary standard and that the VAT is in fact a proportional tax . An OECD study found that VAT could even be slightly progressive. VAT's effective regressivity can be reduced by applying

SECTION 60

#1733085098276

5084-452: The price determined by customs. However, as a result of EU administrative VAT relief, an exception called Low Value Consignment Relief is allowed on low-value shipments. VAT paid on importation is treated as input VAT in the same way as domestic purchases. Following changes introduced on 1 July 2003, non-EU businesses providing digital electronic commerce and entertainment products and services to EU countries are required to register with

5166-480: The purchase of food for human consumption from supermarkets, grocers etc., the purchase of pharmaceutical products, school tuition fees and scheduled bus service fares are exempted from VAT. The EU commission wants to abolish or reduce the scope of exemptions. There are objections from sports federations since this would create cost and a lot of bureaucracy for voluntary staff. A VAT group is a grouping of companies or organisations who are permitted to treat themselves as

5248-399: The purpose of limiting their tax burdens". It is in contrast with the constitutional right to the freedom of entrepreneurship . A domestic supply of goods is a taxable transaction where goods are received in exchange for consideration within one member state. One member state then charges VAT on the goods and allows a corresponding credit upon resale. An Intra-Community acquisition of goods

5330-454: The rules of the WTO is controversial; it was alleged that the proposed tax would favour domestically produced goods as they would be taxed less than imports, to a degree varying across sectors. For example, the wage component of the cost of domestically produced goods would not be taxed. A 2021 study reported that value-added taxes were unlikely to distort trade flows. The VAT rate is 20%. However,

5412-441: The sale, but still gives the exporting merchant a credit for the VAT paid on the purchase by the exporter (in practice this often means a cash refund) ("zero-rating"). The importing member state "reverse charges" the VAT. In other words, the importer is required to pay VAT to the importing member state at its rate. In many cases a credit is immediately given for this as input VAT. The importer then charges VAT on resale normally. When

5494-406: The same amount of tax is collected regardless of how many times goods change hands before arriving at the ultimate consumer. By contrast, sales taxes are collected on each transaction, encouraging businesses to vertically integrate to reduce the number of transactions and thereby reduce the amount of tax. For this reason, VAT has been gaining favor over traditional sales taxes. Another difference

5576-473: The services are supplied to customers established outside the Community, or to taxable persons established in the Community but not in the same country as the supplier. Most exceptions switch the place of supply to the place of receipt. Supply exceptions include: Miscellaneous services include: The place of real estate-related services is where the real estate is located. There are special rules for determining

5658-438: The simplest and most effective indirect tax system. This led to the EEC issuing two VAT directives, adopted in April 1967, providing a blueprint for introducing VAT across the EEC, following which, other member states (initially Belgium, Italy, Luxembourg, the Netherlands and West Germany) introduced VAT. The First Directive was concerned with harmonising the legislation of the member states with respect to turnover taxes. This act

5740-587: The standard rate. Examples include hairdressers and barbers, bicycle repairs, footwear and clothing repairs, freelance journalists and models, cleaning services, and municipal waste. Value added tax identification number The full identifier starts with an ISO 3166-1 alpha-2 (2 letters) country code (except for Greece, which uses the ISO 639-1 language code EL for the Greek language, instead of its ISO 3166-1 alpha-2 country code GR , and Northern Ireland, which uses

5822-399: The tax authorities in the relevant EU member state, and to collect VAT on their sales at the appropriate rate according to the location of the purchaser. Alternatively, under a special scheme, non-EU and non-digital-goods businesses may register and account for VAT on only one EU member state. This produces distortions as the rate of VAT is that of the member state being registered to, not where

5904-644: The tax, but only by successfully selling the value-added product to the buyer at the next stage. In the previous examples, if the retailer fails to sell some of its inventory, it suffers a greater financial loss in the VAT scheme, in comparison to the sales tax regulatory system, by having paid a higher wholesale price on the product it wants to sell. Each business is responsible for handling the necessary tax paperwork. However, businesses have no obligation to request certifications from purchasers who are not end users, or of providing such certifications to their suppliers, but they incur increased accounting costs for collecting

5986-483: The tax, typically via a rebate to the exporter. VAT is usually implemented as a destination-based tax, where the tax rate is based on the location of the producer. VAT raises about a fifth of total tax revenues worldwide and among the members of the Organisation for Economic Co-operation and Development (OECD). As of June 2023, 175 of the 193 countries with UN membership employ a VAT, including all OECD members except

6068-422: The tax. The simplified examples assume incorrectly that taxes are non-distortionary: the same number of widgets were made and sold both before and after the introduction of the tax. However, the supply and demand economic model suggests that any tax raises the cost of the product for someone. In raising the cost, the supply curve shifts leftward. Consequently, the quantity of a good purchased decreases, and/or

6150-485: The taxpayer are essentially aimed to carry out a tax advantage which is contrary to the purposes of the EU Sixth Directive. Such a jurisprudence implies an implicit judicial evaluation of the organizational structure chosen by the entrepreneurs and investors operating across multiple EU member states, in order to establish if the organization was appropriately ordered and necessary to their economic activities or "had

6232-400: The two states, and any tax payable on distance sales is collected by the seller. However, there are a number of special provisions for particular goods and services. The EU VAT system is regulated by a series of European Union directives . The aim of the EU VAT directive ( Council Directive 2006/112/EC of 28 November 2006 on the common system of value-added tax ) is to harmonize VATs within

6314-422: The valid VAT number of the customer is a material requirement to be able to apply the zero VAT rate for intra-Community supplies of goods in the EU. If the customer’s VAT number is not valid, 0% VAT rate cannot be applied. Companies must make sure that the VAT numbers of their customers are checked. You should always verify that the VAT number is valid in each corresponding country’s tax system, as giving false IDs

6396-404: Was allowed if the importing member states fears that without the lower threshold amount competition within the member state would be distorted. Only Germany, Luxembourg and the Netherlands applied the higher €100,000 threshold. A supply of services is the supply of anything that is not a good . The general rule for determining the place of supply is the place where the supplier of the services

6478-528: Was increased to 17.5% in 2011. The rate on restaurant and hotel accommodations is between 10% and 15% while certain foods and goods are zero-rated. The revenue is collected by the Barbados Revenue Authority . VAT was 20% as of 2023. A reduced rate of 9% applies to baby foods and hygiene products, as well as on books. A permanent rate of 9% applies to physical or electronic periodicals, such as newspapers and magazines. Goods and Services Tax (GST)

6560-738: Was introduced in 1991, replacing sales tax and most excise duties. The Value Added Tax Act, 1991 triggered VAT starting on 10 July 1991, which is observed as National VAT Day. VAT became the largest source of government revenue, totaling about 56%. The standard rate is 15%. Export is zero rated. Several reduced rates, locally called Truncated Rates, apply to service sectors and range from 1.5% to 10%. The Value Added Tax and Supplementary Duty Act of 2012 automated administration. The National Board of Revenue (NBR) administers VAT. Other rules and acts include Development Surcharge and Levy (Imposition and Collection) Act, 2015; and Value Added Tax and Supplementary Duty Rules, 2016. Anyone who collects VAT becomes

6642-400: Was introduced. In 2015, rates were revised to 21% for the standard rate, and 15% and 10% reduced rates. The lowest reduced rate primarily targeted baby food, medicines, vaccines, books, and music shops, while maintaining a similar redistribution of goods and services for the other rates. In 2024, a law aimed at reducing the national debt featured return to two rates: a standard rate of 21% and

6724-410: Was to replace the multi-level cumulative indirect taxation system in the EU member states by simplifying tax calculations and neutralising the indirect taxation factor in relation to competition in the EU. The EU value-added tax is based on the "destination principle": the value-added tax is paid to the government of the country in which the consumer who buys the product lives. Businesses selling

#275724