Introduced first in France in 1954, VAT or value added tax was slowly implemented in most countries in Europe. in the coming years as well as in matters of tax eu countries have mostly opted for vat is a taxation system that bypasses the perils of double taxation while also ensuring better adherence to tax payments.
Most countries around the globe usually depended on traditional sales tax systems as a way of collecting revenues through taxes. However, the system was not perfect and goods along with services were taxed several times under this system. Vat is applicable every-time specified goods or services change hands and vat registered traders simply get back the paid tax amount once they issue a vat invoice to their clients and collect the tax back. Regular vat returns ensure that traders provide all vat details thus to their respective vat departments.
Most eu countries including Denmark, Greece, Sweden, France, Italy, Poland, Germany, Spain, Ireland, Hungary, the United Kingdom, Portugal, and Austria, amongst others have opted to remain vat registration number with vat while other countries around the globe too have moved to this process of collecting taxes on goods and services. Although vat rules differ slightly in a number of countries, most of them do remain similar in principle to other countries although vat rates on similar items might differ.
Most eu countries such as the UK have 3 basic vat rates which might be charged whenever services or goods are sold. The standard rate of vat ‘s what is usually charged on many products or services, which range from 15-25%. Other goods and services fall under the lower vat rate of 1-5%, while several others fall under the zero vat rate category. Additionally, there are certain vat exempt goods and services where no vat is charged and no vat can be claimed either. Each country possesses its own vat rate classifications where thousands of products or services are segregated in line with their vat rates.
Traders that want to adhere to the vat system have to become vat registered traders in their country. This can be achieved by crossing the vat threshold limit set by their country. In this particular vat tax eu countries too have various threshold limits and traders might need to appoint a vat agent with good knowledge of eu vat and uk vat rules, particularly if they import goods or services from member eu countries to the UK. When a trader gets vat registration then the business will have to issue vat invoices mentioning vat rates clearly and even file regular vat returns. However, any vat paid in another country could be claimed back by the trader by opting for vat refunds, which in turn would aid in avoiding double taxation and give a cash flow boost for the trader?s business.
Vat continues to be openly welcomed by most eu countries including the UK, and traders can easily comprehend the system once they become vat registered traders. A professional vat agent on hand can also guide them during calculations and filing of vat returns so as to reclaim any previously paid vat. In matters of tax eu countries have mostly chosen vat and this unified system helps many traders in such countries to quickly recover previously paid taxes.