Module 4

Consumption taxes: how VAT works, taxable supplies and rates, registration, the place of supply, invoices, sales tax and customs

Taxes on consumption raise more of the world’s revenue than any other single group of taxes, and value added tax (VAT, or GST in some countries) is the most widespread of them. It is collected by businesses, not paid by them: a business adds the tax to its prices, passes it to the state, and recovers the tax that it has itself paid on its purchases, so that the real burden falls on the final consumer. Its logic is elegant and its details are demanding, because the rate depends on what is supplied, and the place of the tax depends on where and to whom it is supplied. This module sets out how the system works, the difference between zero-rated and exempt supplies, who has to register, how tax is recovered and how the place of supply is decided in cross-border dealings.

General education on taxation law, using invented people, businesses and figures. It states common principles in simplified form and does not describe any one country’s law, which differs and changes; tax rules, rates, thresholds and deadlines are strict and local. It is not tax or legal advice. Consult a qualified adviser in the place that matters.