VAT Calculator

VAT (value-added tax) is a type of indirect consumption tax imposed on the value added to goods or services, specifically during different stages of the supply chain, which may include production, wholesale, distribution, supply, or any other stages that add value to a product. VAT is commonly used by governments around the world as one of their main sources of revenue, and accounts for approximately 20 percent of worldwide tax revenue. It is the most common consumption tax in the world and is enforced in more than 160 countries. All countries that are part of the European Union (EU) are legally required to enforce a minimum VAT rate, and since its introduction in the 20th century, European VAT rates have consistently increased. The U.S. is the only developed country in the world that doesn't use VAT.

VAT Differences between Countries

While all countries follow a general VAT blueprint, there are a lot of differences in the finer details of their respective implementation. The VAT in one country will not be the same as the VAT in another. Differences between countries include the taxes imposed on specific goods or services, whether the taxes apply to imports or exports, and rules regarding filing, payment, and penalties.

VAT vs. Sales Tax

A sales tax is a consumption tax paid to a government on the sale of certain goods and services. Usually, the sales tax is not collected during the different stages of the supply chain. Only during the final stage, the vendor collects the sales tax from the end consumers as they make purchases.

VAT functions differently from sales tax, and is a bit more complex. Sales tax is only imposed once when the consumer of the product pays the vendor. VAT is superior to sales tax in regards to preventing tax evasion or malpractice because taxes are applied during the entire process of production and distribution, rather than as a single instance at the end.