Introduced first in France in 1954, VAT or value added tax was slowly implemented generally in most European countries. in the coming years and 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 means of collecting revenues through taxes. However, the system was not perfect and goods as well as services were taxed multiple times under this system. Vat is applicable every-time specified services or goods 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 make sure 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 UK, Portugal, and Austria, amongst others have opted to remain vat registration number with vat while other countries around the world too have shifted to this process of collecting taxes on goods and services. Although vat rules differ slightly in various countries, most of them do remain similar in principle to other countries even though vat rates on similar items might differ.
Most eu countries including the UK have 3 basic vat rates which might be charged whenever goods or services are traded. The regular rate of vat is what is normally charged on most products or services, and these range between 15-25%. Other products or services fall into the lower vat rate of 1-5%, while several others fall into the zero vat rate category. Additionally, there are certain vat exempt goods and services where no vat is charged and no vat could be claimed either. Each country has its own vat rate classifications where a large number of products or services are segregated according to their vat rates.
Traders that are looking to adhere to the vat system have to become vat registered traders in their own country. This is often 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 understanding of eu vat and uk vat rules, especially if they import services or goods from member eu countries into the UK. Once a trader gets vat registration then a business will need to issue vat invoices mentioning vat rates clearly as well as file regular vat returns. However, any vat paid in another country could be claimed back by a trader by opting for vat refunds, which in turn would help avoid double taxation and provide a income boost to the trader?s business.
Vat has been openly welcomed by most eu countries including the UK, and traders can easily understand the system once they turn into vat registered traders. A professional vat agent readily available can also guide them during calculations and filing of vat returns in order to reclaim any previously paid vat. In matters of tax eu countries have mostly chosen vat and also this unified system has helped many traders in these countries to quickly recover previously paid taxes.