What is VAT (Value-Added Tax)?
Value-Added Tax (VAT) is a consumption tax applied at each stage of the production and distribution process where value is added to goods or services.
Businesses collect VAT from customers on behalf of the government, and they can reclaim VAT paid on their own purchases, ensuring the tax burden is only on the final consumer.
Why VAT Matters:
VAT is revenue for Governments, It is a significant income source, funding public services.
Businesses, especially those operating internationally, must adhere to VAT regulations.
Detailed invoices show VAT, making taxation more accountable and transparent.
Example:
If a manufacturer sells a product to a retailer for $100 and adds 10% VAT, the retailer pays $110.
When the retailer sells it to a customer for $150, they add VAT (10%), and the customer pays $165.
The retailer submits $15 VAT to the government but keeps the $10 they already paid as credit.
