What is VAT ?

1. What is VAT ? How does it work? A value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed. Value-added taxation is based on a taxpayer's consumption rather than their income. In contrast to a progressive income tax, which levies greater taxes on higher-level earners, VAT applies equally to every purchase. When goods or services are purchased, VAT is included in the price of the goods or service. When businesses levy VAT on goods and services, it creates an additional level of accountability and obligation to the tax authorities as that tax must be remitted to the appropriate authority and not retained or considered as additional revenue by the business. Those payments are made monthly, quarterly, or annually and are calculated in concert with the business’s accountant to ensure accuracy. Each country has a different VAT rate. In the U.A.E., that rate is currently 5% with certain exceptions.

2. A VAT system is often confused with a national sales tax. Best VAT Advisors in UAE provides best advice. In this Sales tax, the tax is only collected once i.e., at the final point of purchase by a consumer and so only the retail customer pays it. The VAT system is invoice- based and collected at several points throughout an item's production, each time value is added and a sale is made. Every seller in the production chain charges a VAT tax to the buyer, which it then remits to the state. The amount of tax levied at each point of sale along the chain is based on the value added by the latest seller. Taxman Tax Consultancy France Cluster, International City Office No. 1, R-28 - Dubai 058 582 9626 https://taxmangulf.com/