Value added tax (VAT) results from the added value of a product, which is created by the added value of a product and is transferred to the resale. It is transferred to the customer while the manufacturer or distributor pays it. At the same time, the manufacturer pays the tax on purchased goods and materials. While the percentage of VAT is usually shown on products, it is basically the value added tax also added to services. The difference between sales tax and sales taxis that companies can have VAT refunded through input tax, or they can be offset against their own VAT liability. The entrepreneur therefore only pays the difference between the sales tax paid and the sales price.
VAT: a definition
The VAT is a so-called consumer tax, which the consumer charged when buying products or in obtaining services. The tax is added by companies to their goods and services and levied on the purchase price or with the invoicing of their customers. The companies then forward the collected tax to the tax office. When paying the tax to the tax office, value added tax is referred to as sales tax. There the use of the sales tax calculator is important.
When is VAT due?
Value added tax is added to the price of goods offered for sale if these are sold to private or commercial customers by a commercial operation. When purchasing the goods, the customer pays the gross price, which includes the actual value of the goods and the additional amount of VAT.
VAT identification is mandatory on the invoice
When purchasing the goods, the customer receives either a cash receipt for cash payment or an invoice for payment by bank transfer. In addition to the payment amount, both documents must also show the VAT rate and the tax amount separately. For the selling company, the receipt or invoice document serves as proof to the tax office that the tax has been properly levied from the customer and as evidence of the amount of sales tax that the seller has received. The same rules apply to services. The service provider adds value-added tax at the applicable rate to the invoice for his service and adds the tax amount to his net claim. The customer – regardless of whether he is a private customer or a commercial customer pays the gross price with the invoice amount, which is composed of the net claim and the tax amount.
Origin and naming of VAT
The VAT is provided with a facility that prevents the tax burden from charging those companies that value a product. This upgrading can be done by creating a completely new product by processing a material, or by refining an existing product. So there must be added value to the previous production stage. At the beginning of the twentieth century the industrialist Carl Friedrich Siemens criticized the practice that the tax burden multiplied, depending on the number of production stages. The final refiners and distributors were thus from the bulk of the taxes affected . Starting in France, this practice was questioned from the 1940s onwards.