HOw DOES VAT WORK?
Value Added Tax affects all phases in the production and supply chain for goods and services. Businesses are tax collectors without consideration. VAT paid to the Government is equal to the VAT collected from customers on sales less VAT paid to suppliers on purchases.
REgistration & accounting for vat
> Governments prepare VAT infrastructure & have businesses registered electronically.
> Businesses account for & pay VAT monthly or quarterly usually (electronically).
>Tax authorities perform basic data checks & carry out audits to detect errors & fraud.
> Errors and fraud can result in significant penalties.
VAT applies to goods and services
> Supplies of goods: means sale of tangible property where title has been transferred.
> Supplies of services: means supply of everything that does not quality as "good".
what are output VAT and input vat?
> Output VAT is the tax due and chargeable in respect of any supply of taxable goods or services made by a taxable person
> Input VAT is the tax payable by a taxable person with relation to goods or services supplied to or import by such taxable person for the purpose of making taxable supplies.