Glossary / Value Added Tax (VAT)

What is Value Added Tax (VAT)?

VAT is a consumption tax on value added to goods and services at each supply chain stage. Businesses collect VAT from customers and remit to government, whilst deducting input VAT paid on purchases from output VAT collected.

Value Added Tax Explained

VAT applies to consumption of goods and services. The tax targets value increases at each production or distribution stage. Rates vary by country and product type as percentages of sales price. Effective VAT management ensures consistent cash flow, competitive pricing, and legal compliance. Poor management causes overpayment, penalties, and legal complications.

Ways to Optimise Value Added Tax (VAT)

Accurate VAT Determination: Proper classification applies correct rates, avoiding costly overpayment or underpayment.
Efficient Input VAT Recovery: Tracking and documenting VAT on business purchases maximises reclaim amounts.
VAT Compliant Invoicing: Compliant invoices with clear VAT amounts and rates enable correct collection and reclaiming.
Utilising Technology: VAT automation streamlines calculations, reporting, and remittance whilst reducing errors.
Regular VAT Reconciliations: Consistent reconciliation identifies discrepancies early, preventing penalties.

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