Value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed. VAT is a form of indirect tax and is used in more than 180 countries around the world.
In Europe, VAT is a common form of taxation and is used in all European Union (EU) member states. The standard rate of VAT across the EU is currently set at a minimum of 15%. This rate is applied to most goods and services, however, some countries have reduced rates for certain items such as food, books, and children’s clothing.
VAT is charged on most goods and services that are bought and sold for use or consumption in the European Union, including physical products such as electronics and food, as well as digital services such as streaming services and online gaming. The rate of VAT applied to a product or service depends on the country in which it is sold.
VAT is collected by the seller from the buyer at the time of purchase. The seller is then responsible for remitting the VAT to the government. This process is known as “VAT compliance” and is monitored by the European Commission.
VAT is an important source of revenue for European governments and is used to fund public services such as healthcare, education, and infrastructure. For businesses, VAT can be a significant cost, but it is also an important source of income.
VAT is an important part of the European economy and is a key element of the EU’s single market. It is designed to create a level playing field for businesses operating in different countries, allowing them to compete on equal terms.