Here’s What You Need To Know About VAT

By David S. Chang

Photo by rawpixel.com from Pexels

Benjamin Franklin said

Benjamin Franklin said there were only two things certain in life: death and taxes. Franklin was correct, you can’t escape from paying taxes. One form of a tax that you may have to pay is the VAT, also know as the Value Added Tax.

So, what is VAT?

The VAT, also known as the Goods and Services Tax (GST), applies to products and services sold to customers primarily in the EU. Many people traveling to Europe are unaware of this tax that they have to pay. Looking to start a business or expand to Europe, make sure you understand how the VAT will impact your finances.

VAT is a consumption tax, much like Sales Tax in the US. This means that the cost falls on the shoulders of the consumer, not the business. As a business owner, you apply the VAT rate to your products and include them in the final price.

The rules for VAT vary from country to country. For companies importing or selling across European and global borders there may be an obligation to register for VAT or GST.

The rules on whether a registration is required depends on many issues, including: local country legislation; type of transaction; starting point for goods; where the seller and customer are based; and registration thresholds. Click here to learn more about the rules and if it applies to you!

What about VAT returns?

You have to submit tax returns to each of the EU member states you sell in. If you meet the payment criteria in that country, you’ll also need to pass on any VAT to the correct government. You could find an accountant who specializes in VAT to aid with this.

You could also rely on any existing accountancy software you use. Use special digital VAT software if you want to generate VAT returns automatically. Whichever way you go, keeping digital records is important.

As you can see, VAT is a challenging situation. It varies greatly from country to country. Many factors determine whether you’re required to register. It’s worth doing thorough research and speaking to a specialist tax advisor to get this right. As with anything tax-related, failing to comply can leave you in a drastic situation. If you’re planning to break out into international markets, you must make sure you comply.

David S. Chang

Award-Winning Entrepreneur, Wealth Manager and CEO | Chief Editor, Author, Keynote Speaker, Consultant ArtofThinkingSmart.com | Political Consultant | Army Officer National Guard | Living To Fulfill Needs, Solve Problems, and Live Passionately!

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