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Businesses always pay VAT on purchases, and collect VAT on sales, but can reclaim the paid VAT if purchase was done for business purposes. This basically means
by qilo 4y ago
Businesses always pay VAT on purchases, and collect VAT on sales, but can reclaim the paid VAT if purchase was done for business purposes. This basically means that the ultimate wholly VAT payer is always the end consumer (person, not business).
- tcmart14 4y agoSo while costs are added on to the customer, it would result in a price raise resulting in lessening their competitive advantage. While they may not eat costs, it may cause them to loose out on potential customers, so they would still feel the VAT, just not directly then, correct?
- qilo 4y ago> So while costs are added on to the customer, it would result in a price raise resulting in lessening their competitive advantage. Every business that sells goods/services in VAT country collects VAT and transfers it to tax authority. There's no any advantage or disadvantage for someone, everyone plays by the same rules. To sum it up, businesses "do not pay" VAT (technically they pay, but then reclaim it at the end of the month). All VAT burden always falls on the end consumer. Wikipedia says, that VAT is similar to sales tax, but since I'm not too familiar with sales tax, can't comment on that similarity. https://en.wikipedia.org/wiki/Value-added_tax https://en.wikipedia.org/wiki/Value-added_tax
- tcmart14 4y agoGotcha, thanks for the explanation!