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.

Collins Dictionary of Law © W.J. Stewart, 2006
References in periodicals archive ?
"Whereas I expect that certain educational and healthcare services will be purely 'exempt' from value added tax with no entitlement to VAT recovery on costs by the related service provider, I expect the provision of basic foodstuff (such as bread, milk, fruits, vegetables and meat) to be 'zero-rated' (exempt with credit, thus enabling the suppliers of basic foodstuffs to recover VAT on their operating costs etc.
The introduction of value added tax on plots is in compliance to European Union directives.
BEIRUT: The Finance Ministry announced Thursday that it had activated its online service for paying the value added tax.
The law of value added tax VAT provides a necessary prerequisite for the development of accreditation services however, without sufficient attention to the development or auditing standards and regulations in force in the country it is conceivable.
Erdogan said they were lowering the value added tax over business offices, shops, stores and other commercial properties, from its current rate of 18 percent down to 8 percent for a period of three months, in order to boost the demand in the construction sector and help construction companies clear their stocks.
On 11 May 2006, the Directorate-General Taxation and Customs Union of the European Commission released a Consultation Paper on modernising Value Added Tax obligations for financial services and insurances.
VALUE ADDED TAX. Dominica's parliament enacted its first-ever Value Added Tax (VAT) system amid muted response from the Opposition to Government MPs' "aye", reports Caribbean Net News (Sept.
The ECJ had declared, on September 12, 2000, that by failing to subject to value added tax tolls collected for the use of toll roads and toll bridges for the service supplied to users, the United Kingdom was in breach of Article 2 of the Sixth Council Directive 77/388/EEC, which governs the scope of value-added tax (VAT).
The bill, which contained few surprises, includes applying Mexico's 15% value added tax to food and medicines, which previously had not been taxed, and a reduction in income tax rates.
Members of Congress have expressed considerable interest in repealing both the individual and corporate income tax and replacing them with consumption taxes, such as a retail sales tax, a value added tax or a personal consumption tax.
For example, the value added tax (VAT) could be an indirect supplement to the already existing personal income and corporate tax structure, which would tax the value added onto an item during each individual stage of production.

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