A value added tax (VAT) is a form of consumption tax that is levied on products, materials and services in most countries around the world. From a buyer point of view, it is a tax on the purchase price. From the perspective of the seller, it is a tax on the value added to a good or service. From an accounting point of view, by this phase of its manufacture or distribution. The seller or manufacturer submits to the tax Office (government) the difference between these two amounts, and retains the rest money for themselves to offset the taxes they had previously paid on the inputs.
The value added to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer pays the real tax. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the tax Office only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products.
The national tax systems of Europe and others countries often allow for a refund of Value added tax to non-resident business entities worldwide. For VAT claims that are not Travel and Entertainment expenses, registration for VAT may sometimes be required prior to the transactions in order to get a refund. Some companies can help you for a fee reclaim your VAT and produce a positive result on your bottom line.
It is common for a vendor or customer in the “VAT using countries” to ask for your company’s VAT number. It can be an important question related to if they will charge VAT tax or not. A value added tax identification number or VAT identification number (VATIN) is an identifier used for value added tax purposes. In the EU and some other countries, a VAT identification number can be verified online.
If you conduct business within a country that requires registration, such as for the importation or sellging goods, then you should get a VAT registration number. Applying for a VAT indetification number must be done through the local government tax authorities. This can be a complicated procedure and often has to be in the local language.