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A business is generally able to recover input VAT to the extent that the input VAT is attributable to (that is, used to make) its taxable outputs. Input VAT is recovered by setting it against the output VAT for which the business is required to account to the government, or, if there is an excess, by claiming a repayment from the government.
VAT is an indirect tax because the tax is paid to the government by the seller (the business) rather than the person who ultimately bears the economic burden of the tax (the consumer). [4] Opponents of VAT claim it is a regressive tax because the poorest people spend a higher proportion of their disposable income on VAT than the richest people. [5]
VAT is generally charged at the border, at the same time as customs duty and uses the price determined by customs. [24] 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.
The tribunal met on 26, 27 and 29 July 2010. [3]The case of CGI Group (Europe) Limited demonstrated that, where an arrangement is structured in order to obtain a particular VAT treatment, it is important to ensure both the contractual documentation and the substance and reality of the arrangement support this treatment.
For a VAT and sales tax of identical rates, the total tax paid is the same, but it is paid at differing points in the process. VAT is usually administrated by requiring the company to complete a VAT return, giving details of VAT it has been charged (referred to as input tax) and VAT it has charged to others (referred to as output tax).
Map of the world showing national-level sales tax / VAT rates as of October 2019. A comparison of tax rates by countries is difficult and somewhat subjective, as tax laws in most countries are extremely complex and the tax burden falls differently on different groups in each country and sub-national unit.
For example, the US system, in 2009, permitted taxpayers to apply excess FTCs to reduce US federal income tax for the first prior year (carry back) and then successively for each of the next succeeding 10 years (carry forward). [23] Germany, in 2007, permitted unlimited carry forward but no carry back. [citation needed]
VAT = Valued Added Tax; BTW = Belasting op toegevoegde waarde South Korea 10% 0% (essential foodstuffs) VAT = bugagachise (Korean: 부가가치세; Hanja: 附加價値稅) Sri Lanka [155] 18% 0% VAT = Valued Added Tax has been in effect in Sri Lanka since 2001. On the 2001 budget, the rates have been revised to 12% and 0% from the previous 20% ...