Introduction - Basic Mechanism of the EU VAT System
3 important questions on Introduction - Basic Mechanism of the EU VAT System
How does the EU VAT system work with regards to the collection of VAT in each stage of the supply chain?
- EU VAT is an all-stage turnover tax
- 'Fractional payments' system used for collection
- Small amounts of total VAT collected at each stage
Why are taxable persons allowed to deduct VAT charged by other taxable persons?
- Deductions ensure taxable persons only pay VAT on added value
- Deductions safeguard the 'neutrality' of VAT
What is the purpose of allowing taxable persons to deduct VAT?
- To ensure that taxable persons only pay VAT on the value they add
- This mechanism prevents cascading of VAT
The question on the page originate from the summary of the following study material:
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