VAT

In plain words

VAT (value added tax) is an indirect tax on consumption included in the price of most goods and services. It is called a tax “on value added” because it is levied at every stage of creating and selling a product — on the value added by each participant in the chain — but in the end the whole burden falls on the end consumer.

The mechanism works like this: a company charges VAT on its sales (output VAT) and deducts the VAT paid to its suppliers (input VAT), and pays the difference to the state. Thanks to this, the tax does not accumulate many times over but is effectively paid on the final value added. VAT rates differ between countries, and some goods and services are taxed at reduced rates or exempt.

For an entrepreneur VAT is an important part of doing business: you need to register correctly as a taxpayer, charge the tax, keep records and file returns on time. Mistakes here lead to penalties. When planning international business and structures, we take the VAT consequences into account so that the tax is administered correctly and the business does not face unexpected obligations.

Where VAT matters

What matters about VAT

How to deal with VAT

1. 01Determine your VAT obligations
2. 02Register as a taxpayer
3. 03Charge and deduct VAT
4. 04File returns
5. 05Correct administration

What you need to know

• VAT is an indirect tax on consumption included in the price of goods and services
• It is levied at every stage on the value added
• The final burden is borne by the end consumer
• Business charges and deducts VAT and files returns
• Rates and reliefs differ by country

Common mistakes

• ✕Not registering as a taxpayer in time
• ✕Deducting input VAT incorrectly
• ✕Ignoring different rates and reliefs
• ✕Missing reporting deadlines
• ✕Not taking VAT into account in international transactions

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