The initials VAT refers to a tribute or tax that consumers must pay the State for the use of a certain service or the acquisition of a good.
The breakdown of this acronym isValue Added Tax (in most countries of Latin America ) or Value Added Tax (in Spain ). And it is a rate that is calculated on the consumption of products , the services , commercial transactions and imports.
VAT is a indirect tax ; It is called that because, unlike direct taxes, it does not directly affect income, on the contrary, it falls on the costs of production and sale of companies and accrues from the prices that consumers pay for such products. This means that it is applied to consumption and that it is financed by the final consumer. It is said that it is an indirect tax that the treasury does not receive directly from the taxpayer.
The VAT charge is specified when a company sells a product or service and issues the corresponding invoice. Companies generally have the right to receive a refund of the VAT they have paid to others Business in exchange for invoices, what is known as fiscal credit , subtracting it from the amount of VAT they charge their customers (the fiscal debit ). The difference between fiscal credit and fiscal debit must be delivered to the treasury.
Who pays VAT and how is it declared?
VAT is calculated as follows. An entrepreneur sells or offers a service and invoices the cost thereof, accruing the tax passed (which must be calculated taking into account the current legislation where it is specified how much does it correspond to based on the type of product or service offered).
Every two or three months, as stipulated by law for the item in which it is registered, the employer must perform the tax return, where the quotas corresponding to VAT for that period will be added. There the calculation of what is paid and received in reference to this tax is made and the balance is established. If this is negative (when the VAT quotas supported have been higher than those passed) the employer may compensate future balances or request the return of said fees. If it is positive, you must pay them.
It is important to mention that for retail merchants There is a special regime to which they can benefit. It determines that if they do not intervene in the production process of the products they sell and if 80% of their sales are to final consumer, the merchant will not have to carry out the VAT settlement. This is due to the fact that said merchant will have paid for the purchase of the product the corresponding VAT, so he would have already complied with what is stipulated by the current tax regime .
It is worth mentioning that final consumers, on the other hand, pay VAT without receiving any refund . The only form of VAT control is the delivery of bill or other proof of sale to the consumer, while the store keeps a copy.
The VAT rate varies according to the country . Ghana (3%), Iran (3%), Canada (5%), Panama (5%) and Japan (5%) are some of the nations with very low rates. Finland (22%), Iceland (24,5%), Denmark (25%), Hungary (25%), Norway (25%) and Sweden (25%), on the other hand, present the most expensive VAT in the world. The rate, however, often varies over time depending on the economic needs of each country.
