Value-Added Tax - VAT

Value-Added Tax - VAT

A type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale. Value-added tax is most often used in the European Union. The amount of VAT that the user pays is the cost of the product less any of the costs of materials used in the product that have already been taxed.

Notes:

For example when a television is built by a company in Europe the manufacturer is charged a VAT on all of the supplies they purchase for producing the television. Once the television reaches the shelf, the consumer who purchases it must pay the VAT that applies to him or her.

See also: Flat Tax, Sales Tax, Taxes, Tax Rate