VAT (Value Added Tax)

    A consumption tax levied at each stage of the supply chain.

    Definition

    Value Added Tax is an indirect tax collected incrementally at each stage of production and distribution. The end consumer bears the final cost, while businesses act as collection agents. VAT is mandatory in all EU member states, with rates varying by country and product category.

    Related Terms

    Input VAT
    VAT paid on purchases used for business activities.
    Output VAT
    VAT charged on sales to customers.
    Reverse Charge
    A mechanism where the buyer, not the seller, accounts for VAT.

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