VAT, TAX REFUND

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Burg, D.F. “A World History of Tax Rebellions: An Encyclopedia of Tax Rebels, Revolts, and Riots from Antiquity to lớn the Present“ (2003)OECD “Consumption Tax Trends 2016“ (2016)James, K. “The Rise of the Value-Added Tax (Cambridge Tax Law Series)“ (2015)Krugman, P.; Wells, R. “Economics, Fifth Edition“ (2017)

This value-added tax a.k.a. VAT calculator is a tool you can use lớn compute the amount of VAT you need to pay và the gross price of the sản phẩm based on its net value. Besides, you may employ our calculator to add VAT or remove VAT to/from the net/gross amount. Before you use this online VAT calculator, you may want lớn take a moment lớn read more about the topic: what is VAT, what is its history, how to lớn work out VAT manually, and what are its economic implications together with some interesting facts.

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VAT definition


Value added tax (VAT), is a consumption tax; it is applied to goods and services, which is why it is known as goods và services tax (GST) known in some countries (Australia, Canada, New Zealand, and Singapore). The name refers to lớn the fact that it is a tax on the "added value", that is the sale price of a hàng hóa after deducting the cost of materials & other taxable inputs (see below for an example). Another form of consumption tax is the sales tax.


What is the difference between VAT/GST and sales tax?


VAT/GST applies to every stage of production of goods and services (therefore called a multi-stage tax) và is calculated based on the "added value" only. It means that each participant in the production chain pays VAT only for the "added value" they create. This process goes on until the hàng hóa reaches its final recipient - the customer. He/she does not produce any "added value", therefore it is he/she who is the ultimate bearer of the tax burden.

In contrast, the retail sales tax is a single-stage tax charged on the total value of sold goods or services when the sale takes place. Therefore it is paid only once in contrast lớn VAT, which is calculated multiple times.

Through a simple example, the below table illustrates the comparison between VAT và sales tax. Imagine a lumberjack cutting trees (without cost) who sells the wood (enough for one barrel) to lớn a sawmill owner for $100. The sawmill owner cuts the wood into oak staves and sells it to the cooper for $150. The cooper then makes a barrel that he can sell for $300 to lớn the retailer who eventually sells it lớn the customer for $350. The total VAT paid is $35 or 10% of the sum of values added at each stage. In the case of sales tax with the same 10% rate the paid tax is identical, however, it"s assessed only at the point of sale lớn the customer.

CSV to lớn HTML using codebeautify.orgStageProductPriceValue Added10 % VAT10 % Retail Sales Tax
1log$100$100$10
2stave$150$50$5
3barrel$300$150$15
4barrel$350$50$5$35
Total Tax$35 $35

The two crucial implications of the difference between VAT và sales tax is that VAT involves higher administrative cost as it is applied more broadly, but it is less visible to the ultimate consumer và thus might be more favorable from a political perspective (Wells và Slesher, 1999).


What is the difference between VAT và GST?


VAT and GST are often used interchangeably, though there are particular differences derived from their implementations. Both forms of taxes are present in multiple stages of transactions and based on the value added; however, VAT procedure is related khổng lồ the production/distribution chain, in contrast lớn the GST which appears in the supply chain. In other words, VAT is linked to the moment of sales, GST is tied khổng lồ the point of supply.

Furthermore, VAT is a tax on the final consumption of goods & services which is entirely borne by the consumer. In contrast, GST is a single tax on the supply of goods and services. Credits of đầu vào taxes paid at each stage are available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

Besides, VAT is performed offline based on a summary regarding a specific period, whereas GST is performed purely online based on transactions. Moreover, in the VAT system, the seller is responsible for the collection of revenues, while in the GST scheme the purchaser is in charge of the records.

Another difference between the two systems is the matter of double taxation, that is present in the VAT regime, as the tax on the excisable goods might also be levied on the manufacturer. In contrast, excise tax within the GST is subsumed up; thus double taxation is not binding in such case.


Margin và VAT procedure


Some companies have the right to choose another khung of VAT taxation called the VAT margin scheme. This VAT procedure allows companies to lớn pay VAT on their profit margin on sold goods. In contrast lớn ordinary VAT, the seller cannot deduct VAT from purchased goods or services. If you need khổng lồ know how lớn calculate your profit margin first you can use our gross margin calculator. If you want to use it in combination with VAT, try the margin và VAT (it has nothing to vày with the "VAT margin scheme", though).


How khổng lồ work out VAT


To calculate VAT, you need to:

Determine the net price (VAT exclusive price). Let"s make it €50.Find out the VAT rate. It will be 23% in our example. If expressed in percentages, divide it by 100. So it"s 23 / 100 = 0.23.To calculate the VAT amount: multiply the net amount by VAT rate. €50 * 0.23 = €11.50.To determine the gross price: multiply the net price by VAT (again, we"d get €11.50) rate và then:Add it to lớn the VAT exclusive price so you get the VAT inclusive. €50 + €11.50 = €61.50.

In essence, it"s just a specific kind of net lớn gross calculation. If you want to vị it quickly, simply use our online VAT calculator.


When can VAT be refunded


There are particular circumstances when the paid VAT is refundable. The following points outline these situations associated with VAT paid in the European Union (EU) countries.

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Cross-border refunds khổng lồ EU businesses: VAT paid during cross-border trades that are occasionally conducted between EU countries.VAT refunds for non-EU enterprises: companies not based in the EU can exclude VAT when they bởi businesses with EU countries.VAT refunds lớn foreign tourists: if you about to visit the EU, it is worth to lớn know that you may be able to lớn recover the VAT paid during your shopping.

You can find the VAT procedure & official guidelines on how to lớn work out VAT refund on the following websites:

For a general review

For visitors to the EU


Value added tax in the United States


Despite the wide prevalence of VAT và GST over the world, the United States is the only individual thành viên among the OECD (Organisation for Economic Cooperation & Development) countries without the establishment of a national-level valued added tax. Instead, sales taxes are levied and controlled at the state (sub-national) & local (sub-state) levels. At the moment, 5 of the 50 US states (Alaska, Delaware, Montana, New Hampshire, và Oregon) don"t apply any sales-related tax.

The evolution of different tax systems depends on country-specific features và historical background, but also their economic systems. You can keep on reading, and in the following section, you will get some more insight on this subject.


Economic implications of the value-added tax


Benjamin Franklin in 1798 stated: "In this world nothing is certain but death and taxes." The eerie statement was declared not in vain: taxation is a prevalent feature of everyday life since its initial appearance - according khổng lồ Burg (2004), it was Ancient Egypt around 2390 BC where the tax was first instituted và collected in the form of grains. With the advent of industrialization, the scope of tax policies gradually expanded and, by the 19th century, taxation was a part of nearly every type of human activity và consumption in more advanced countries. As government tax commonly accounts for a considerable part of government revenue, this change profoundly affected our financial affairs - VATs political & economic concerns became paramount.

The following graph shows the nội dung of VAT as a percentage of total taxation in năm trước through different countries.

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Source: Revenue Statistics (2016), OECD.

The economic implications of taxation can change depending on the theoretical approach & the type of tax. Adaptation or modification of VAT structure – in scope or tax rate - can impact the economy as a whole through different channels:

It may affect saving behavior

Economists, as common in a wide range of economic issues, often disagree on the implications of various tax burdens. The discussion on the choice between income taxconsumption tax constitutes one of these heated topics. A considerable part of the profession believes that income tax distorts saving behavior as it cuts earnings, thus reducing the disposable income (the part of income that is available after taxation) that people could devote lớn saving. On the other hand, a consumption tax emerges only when savings are spent; hence it doesn"t alter saving decisions. Since higher savings contributes to lớn higher investment, relying more on consumption tax may favor more for economic growth.

In the United States, government revenues depend more on personal income taxes compared to lớn European countries, where consumption taxes hóa trang the highest portion of government incomes. There were several attempts to move the US taxation system toward consumption-based taxation as advocates of such a shift argue that it would encourage individuals khổng lồ save more. Higher savings then would foster economic growth in productivity và living standards.

In contrast, promoters of the present income tax believe that people wouldn"t change much their saving habit in response lớn such a shift in the tax system. By addressing this concern, American policymakers adjusted the income tax law to compensate for such an adverse effect. Taxpayers can settle a limited amount on a special saving tài khoản (for example Individual Retirement Accounts & 401(k) plans) that is not subject to taxation until they withdraw their money during retirement. In such a case, people who save through these accounts eventually taxed based on their consumption rather than their income.

It redistributes income in the economy

Firmly connected to lớn the argument on the issue of saving behavior, tax laws which promote savings also impose more substantial weight on people with lower income. It is so because lower-income families usually can"t afford savings và they tend lớn spend all their income on daily consumption; thus such a system reduces the tax burden on wealthier people and pushes the government to lớn impose a higher tax on the poor. It follows that in countries where tax revenues heavily rely on consumption taxes, lượt thích a high VAT rate, it may widen the gap between rich and poor, thus increasing inequality in the society. The below figure shows the standard rate of VAT in OECD countries in 2016. The highest standard rate (27%) belongs khổng lồ Hungary; however, it is compensated by reduced rates applied to lớn foods and newly built homes lớn help the poor and support families.

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Source: Consumption Tax Trends (2016), OECD.

It can alter price levels

Implementation or adjustment of VAT rate may affect price level, though its magnitude and lasting effect depend on not only the kiến thiết of the tax law but also the economic factors và reaction of economic actors to such a change. To see this, let"s consider a rise in VAT rate in a country. The immediate effect of the change is certainly an increase in price levels of products that are subject of VAT; however, its inflationary effect may be mitigated if the seller doesn"t transfer such a cost entirely lớn the final customer. Such a situation may happen in sectors where the competition is high among sellers or the consumer demand is more sensitive to lớn price changes. In other words, the full price effect depends largely on the price elasticity of demand. Besides, the government may force sellers not to lớn raise prices, thus implement a so-called price ceilings measure, that further dampen the price effect. However, even if a shift in VAT rate induces price change, the duration of the effect is rather short and hardly induce a sustained increase in the inflation rate.

Automatic stabilizer

Since government taxes, in general, emerge from economic activities, their cấp độ depends largely on the real Gross Domestic sản phẩm (GDP). The value-added tax particularly moves in tandem with economic production because of its consumption-based character. When income grows, people spend more on goods và services hence tax receipts automatically increase. In other words, a percentage of the total income produced in a country flows to lớn the government depending on the economic activity: higher economic activity means higher tax receipts & lower GDP means lower tax revenue. However, as consumption forms a considerable part of GDP, most of this flows into the government, while a smaller proportion flows back into the economy (as a khung of consumption) and contributes khổng lồ economic growth. It follows that taxes can be considered as an automatic stabilizer since they protect the economy from overheating but also can support economic activity when the production is lower than expected. Besides, the government can boost consumption by reducing VAT rates; however, the effect of these policies are ambiguous và hardly long-lasting.

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