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Tax & Compliance
VAT (Value Added Tax)
Definition
A consumption tax added at each stage of production and distribution.
Overview
VAT is charged on goods and services in many countries. Businesses collect VAT from customers and remit it to the government, minus VAT paid on business purchases.
Example
A UK consultant charges £1,000 plus 20% VAT (£200), totaling £1,200. They remit the VAT collected minus VAT on their expenses.
Best Practices
Understand VAT rules for your jurisdiction, register when required, and file returns on time.
Common Mistakes to Avoid
Not registering when required
Incorrect VAT rates
Late filing
Frequently Asked Questions
Do I need to charge VAT?
Depends on your country, revenue threshold, and type of goods/services. Check local regulations.