value added tax

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value added tax (VAT)

a tax on consumer expenditure collected on business transactions, imports from outside the EU and acquisitions from other EU countries. All EU countries apply VAT in accordance with the Sixth Directive. Many non-EU countries have adopted a tax very similar to VAT, e.g. Mexico, Russia, New Zealand and Australia. The UK law is based upon the Value Added Tax Act 1994, statutory instruments made under that Act and parts of certain VAT notices published by HM Revenue & Customs which are law because of powers given by statutory instrument. The main charge to VAT applies where there is a supply of goods or services in the UK, or the Isle of Man, by a taxable person in the course or furtherance of business and the supply is not specifically exempted. A taxable person is any individual, partnership, company or other entity which is registered for VAT, or ought to be registered because of making taxable supplies above certain value limits. A person who makes taxable supplies below these limits can register voluntarily in order to recover VAT incurred on purchases of goods and services (inputs) related to making those taxable supplies.

There are three rates of VAT: a standard rate, a reduced rate and a zero rate. There is a fundamental distinction between zero-rating and exemption because a business making zero-rated supplies can recover all the related INPUT TAX whereas the VAT incurred on goods and services acquired in order to make exempt supplies cannot be recovered and forms an additional cost to that business. Even businesses which could otherwise reclaim VAT on their inputs cannot normally do so in respect of cars and business entertainment. All taxable persons must keep and preserve records and accounts of all taxable goods and services which they receive or supply in the course of their business, as well as records of any exempt supplies that they make. Such records must normally be kept for six years. There are a range of financial penalties and interest charges to encourage people to register for VAT on time, to send in accurate VAT returns and to make payments on time.

References in periodicals archive ?
PRI members do not want to incur the wrath of voters for supporting the unpopular value-added tax expansion.
If the sales tax becomes a value-added tax, which taxes the "value added" to a product or service at each stage of the production process (with the result that the final effect on the retail price would be the same), would supporters of the sales tax back away?
Reducing the Deficit: Spending and Revenue Options, prepared for Senate and House budget committees, outlines tax options that could help balance the budget by 2002, including increasing existing taxes and imposing new ones, such as a value-added tax or a broad-based energy tax.
of Manufacturers has offered the alternative idea of substituting a value-added tax (VAT) for the Btu tax proposal as a better way to raise revenue without damaging energy-intensive industries.
The value-added tax is one of the few tax proposals that could increase the share of U.
association holds an overseas meeting, it quickly learns about the value-added tax, the European version of a federal sales tax.
Consumption tax options include: the retail sales tax, the European style invoice and credit value-added tax and the deduction method value-added-tax, a business transfer tax promoted by Senator William Roth (R-DE).
Of such receipts, customs receipts from the value-added tax totaled $113.
Hassan Abdullah, of the sales tax authority, told Al-Ahram that he considers the recent amendments to the taxes on cement, iron and cigarettes as a kind of transition to the value-added tax as some of these businesses will be able to recover based on the value added in their products.
The value-added tax rate for tourist accommodation will be reduced from 21 percent to 10 percent from May 1, according to amendments to the Law on Value-Added Tax.
tax code is very unlikely to scrap the income tax system in favor of a national sales tax or a European-style value-added tax, the panel's vice chairman told the American Council of Life Insurers.

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