VAT Value Added Tax explained
Video Overview & Insights
What is VAT? How does VAT work? VAT, or Value Added Tax, is a system of indirect taxation. In this quick VAT tutorial, I will walk you through the concept and definition of how VAT works, run you through a VAT example with a Value Added Tax calculation, and discuss the different VAT categories in use. How does VAT work? What is reverse charge VAT? Find out in this Finance Storyteller video.
Want to learn more about how to calculate VAT? Watch my video on VAT exclusive and VAT inclusive: https://youtu.be/d3j9OdOQqmU
⏱️TIMESTAMPS⏱️
0:00 Introduction to VAT
Thank You
0:20 Basics of a VAT system
1:25 Value Added Tax example
IVA.. America
Is a value added sales charge that used in America continent. In Duty Free shop and other stores in America..
VAT.. Europea
Is a value added sales charge that used in Europea continent.. in Duty Free shop and other stores in Europea..
3:43 VAT categories and rates
5:13 Reverse charge VAT
If as a retailer if I purchase goods from an xyz distributor, What happens if the xyz distributor is a non-filer of VAT returns. As a retailer would I still get input tax credit?
VAT, or Value Added Tax, is a system of indirect taxation. In this quick #VAT tutorial, I will walk you through the concept and definition of how VAT works, run you through a VAT example with a Value Added Tax calculation, and discuss the different VAT categories in use.
VAT is used in around 140 countries in the world. These are the basics of a VAT system:
You, Sir, have strung me through my entire college experience. I'm graduating this year!!!! God bless!
VAT is a system of indirect taxation on the sale of goods and services to final consumers, in other words VAT is a tax on consumption.
VAT is collected in stages through what is called “the chain of supply”, as you see in the picture on the right. I will illustrate this “chain of supply” concept with numbers in the next part of the video.
Good to learn here. I have no idea of reverse charge but got tangible info on being applicale to cross border transactions.
VAT registered businesses charge VAT on their sales (this is called output tax) and recover VAT on their purchases and expenses (this is called input tax), and settle the difference with country tax authorities. VAT is not a cost to businesses themselves, they collect and pay it “on behalf of the government”.
VAT rates and rules are subject to change, so check with your local country tax authorities or tax advisor for any country-specific applications of the general idea, and any exceptions to the rule.
Thank you 🎉 it's years ago but it is still help ful
The European Union is very well known for having a well-functioning VAT system. Please be aware that although many VAT related legislation is largely standardized across the EU member states, the standard rates differ widely, and what goes into the standard versus the reduced rate category can also differ from country to country.
In this globalizing world with lots of cross-border transactions, how does VAT work in an international context? How about the Dutch training company of your Finance Storyteller that delivers training services in other EU countries? How should he apply VAT?
Thanks man I understood everything n how taxes work.
The main rule is that the place of supply of business-to-business services provided between two VAT-entrepreneurs within the EU, will be the country where the recipient of the services is established.
So does that mean that this training services company has to register for VAT in all EU countries where it supplies its services?
Thanks sir good information
For most companies, fortunately not!
There is solution for this situation and it is called “Reverse charge” VAT!
GoOd
In reverse charge VAT, there is no VAT on the invoice itself.
The recipient of the invoice self-assesses local country VAT in their monthly or quarterly VAT filing, and deducts that same amount in that VAT filing, effectively leading to a VAT charge of zero, but with two line items.
I am in Zimbabwe and have dealt with VAT without understanding for 5 years (so I used the patterns I saw and it has worked until I started to conflict with the reporting manager). I hesitated researching as I often doubted my capabilities but this video got me to understand the first part of our VAT, the impact and also the correct terminology. I am impressed and pleased that it was simple to understand and not an overwhelming amount to review. Thank you! Following and going through more videos to learn!
Both supplier and customer file a separate form of cross-border transactions, detailing “counterpart” VAT number and amount.
That’s how reverse charge VAT works! It greatly simplifies my administrative life.
Thank you very helpful
Here’s what your Accounts Payable staff should look out for when receiving “reverse charge VAT” invoices.
The VAT amount on the invoice should be zero.
Can u differentiate VAT from EVAT?
The VAT number of the supplier and the VAT number of the (correct) invoiced legal entity are mentioned.
The supplier has mentioned “Reverse charge” (in English) / “Umkehrung der Steuerschuldnerschaft” (in German) / “Autoliquidation” (in French) or “BTW verlegd” (in Dutch) on the invoice.
Am I the only one here because of a school project?
Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!
thank u
More User Perspectives
Hello! Thank you for the good explanation, but I still don't understand.
In the end, the government collected 80 euros VAT throughout the transaction. The 80 euros is paid by the four businesses, each paid 20 euros. why say businesses don't pay VAT?
Do you pay VAT to govt. if you sell digital goods like online courses and affiliate marketing products?
@prateekwalia1898Thank you
@anuththarathathsarani6681Hi, I have come across a new animal called "import VAT" by which I, a consumer, buy a final product abroad, and am charged an "import VAT" at the border (on top of my customs duties).
Isn't that a misnomer?
What exactly is the value added that gets taxed?
..the whole product was produced and sold/bought abroad!
Can someone clarify: What is the actual purpose of the VAT? Does it distribute tax burden throughout supply chain, instead of the end consumer? Is it a replacement or substitute for higher corporate rates then?
@PawsAndKeysFine like it
@chinenyealajemba6323Clean and perfect one....
@bharathykrishnamoorthy7624Nice video thank, I have a question if you are an intermedia in UK , company that Buy services from other companies to use in Uk and EU the company need to charge VAT to the consumers?
@danielmartintraderSo why not just charge the 20% tax at the point of sale? Wouldn't that make this much simpler or am I missing something?
@OmarDelawarThanks for the info.
@AmbujdrkThank you very much for this course sir. I recently joined a company as an accountant in the Netherlands. the company have an intercompany with baby company in Singapore. so singapore makes a sales to a customer in australia>> NL sends the goods to the client in Australia ( and later invoice singapore intercompany) My question is the courier DHL or Schenker sends NL a tax invoice but when in Australia the courier charges the customer another kind of invoice. the customer now send us this kind of invoice which is only like tax invoice. now in Netherland, I do not know how to book this kind of invoice or how to classify this type of invoice under the tax rules.? Can my company book this type of VAT to claim it from the belastingdienst? and under which tax code is applicable? Thank you for your reaction?
@Heartie_adiepenaWhat you're describing is a gross receipts tax not a value-added tax. In a value-added tax only the value added in each stage of production is getting taxed so the same value doesn't get taxed multiple times throughout the production process.
@lain11644So each step along the way pays 20% of the previous step's value except the consumer who pays the cumulative net amounts on top?
@themaverickblackbelt8054Very helpful
@TabsdotcomRead My LIPS, NO NEW TAXES!
@cheekynham2411Great! Thanks for the info! 👍
@WiLLaxaAndrew Yang has the right idea and implementation.
https://www.yang2020.com/policies/value-added-tax/
Andrew Yang brought me here he does a good job explaining VAT. This is a nice online tool that makes it easier to calculate vat : https://www.vatcalculator.org/
@thebahamiannightmareSo it's 200 euros out of 480 is taxes for that product to the end consumer
@goodforyou3000I agree with the other comment, the example shows the consumer is the one who ends up paying all 80 Euros while the businesses in the supply chain get all their VAT payments back. How is this "getting the sliver of Amazon sales" according to Andrew Yang? Amazon is part of the supply chain and so will end up paying no VAT! I understand the VAT can be zero or exempted for foods and other necessities, but it's still a tax on the consumers on most goods and services.
@MindandQiR1So this VAT + Sales tax = no money left for me
@Stuntman47The important thing to note in the example is that the government collects $80 and the consumer pays $80. It's like a sales tax only with extra steps and more flexibility. No thanks.
@Steeli0How many times do we have to explain to these yang morons that vat is a tax on consumers.
@GazMaticThank you for the video!
@andresv.399In example, MANUFACTURING gets $100, while govt gets $200 (20+40+60+80) for ZERO role in the process.
@lapurdy71This isn't entirely accurate, businesses do not pass on all of the VAT as a rise in price to consumers. Studies have concluded from looking at when governments change the VAT rates that businesses raise prices by around 50% of the VAT rate. https://voxeu.org/article/assessing-incidence-value-added-taxes https://core.ac.uk/download/pdf/6505761.pdf https://www.econstor.eu/bitstream/10419/123182/1/cesifo_wp5531.pdf
@galerion3:22 VAT is a tax that impacts consumers
@Orf1:00 VAT is not a cost to businesses themselves, they collect and pay it on behalf of the government***
@OrfSome states in the USA will impose an out of state VAT method of taxation for on line purchases in the near future.
@epacm50Basically sales tax only tax the seller, Vat tax everyone in the production and supply chain.
Also can't tax dodge.
Also Vat is flexible that luxury items like sports car can be taxed at much higher % than groceries.
As long as Andrew Yang taxes only the conglomerate tech companies, then I will vote for Yang. He better not be VAT-ing small businesses. Holy cow, can you imagine all the administrative work involved??
@mirandah6927In the circumstance that the retailer charges 0 VAT, how much do they have to remit to the government?
@andrewsekwatHere to learn more about Andrew yangs V.A.T. Plan.
@BlazinTiggerShould every country have Value Added Tax (VAT)? If so, what should governments spend this tax revenue on? Should VAT "replace" other forms of taxation? Let me know by commenting below!
@TheFinanceStorytellerSo how is this different from the sales tax system used in America?
@Vospader21