Introduction to VAT and GST

Accrual Method – A method of accounting where income and expenses are rec… #

This is the method used for VAT purposes.

Ad valorem – A Latin term meaning "according to value" #

Ad valorem taxes, such as VAT and GST, are calculated as a percentage of the value of the goods or services being taxed.

Apportionment – The process of dividing an input tax credit between taxab… #

Apportionment – The process of dividing an input tax credit between taxable and exempt supplies in proportion to the value of those supplies.

Article 29 – A provision in the EU VAT Directive that allows Member State… #

Article 29 – A provision in the EU VAT Directive that allows Member States to grant VAT exemptions for certain supplies of goods or services.

Article 135 – A provision in the EU VAT Directive that allows Member Stat… #

Article 135 – A provision in the EU VAT Directive that allows Member States to apply a reduced VAT rate to certain supplies of goods or services.

Bad Debt Relief – A provision in VAT law that allows businesses to claim… #

Bad Debt Relief – A provision in VAT law that allows businesses to claim a refund of the VAT they have paid on bad debts.

Capital Goods Scheme – A scheme used in some countries to apportion the i… #

Capital Goods Scheme – A scheme used in some countries to apportion the input tax credit for capital items, such as buildings and machinery, between taxable and exempt supplies.

Cash Accounting – A method of accounting where income and expenses are re… #

This method is not typically used for VAT purposes.

Certificate of Entitlement – A document that confirms a business's entitl… #

Certificate of Entitlement – A document that confirms a business's entitlement to claim input tax credits.

Chain Transaction – A series of supplies where the output of one supply i… #

Chain Transaction – A series of supplies where the output of one supply is the input of the next.

Composition Scheme – A simplified scheme for small businesses that allows… #

Composition Scheme – A simplified scheme for small businesses that allows them to pay a fixed amount of VAT based on their turnover, rather than calculating the VAT due on each individual supply.

Consideration – The payment or other benefit that is given in exchange fo… #

Consideration – The payment or other benefit that is given in exchange for goods or services.

Continuous Supply of Services – A supply of services that is provided ove… #

Continuous Supply of Services – A supply of services that is provided over a period of time, such as a subscription or a membership.

Deemed Supply – A supply that is treated as taking place for VAT purposes… #

Deemed Supply – A supply that is treated as taking place for VAT purposes, even though no goods or services are actually supplied.

Domestic Reverse Charge – A mechanism used in some countries to shift the… #

Domestic Reverse Charge – A mechanism used in some countries to shift the responsibility for VAT accounting from the supplier to the customer for certain domestic supplies.

Exempt Supply – A supply of goods or services that is not subject to VAT #

Exempt Supply – A supply of goods or services that is not subject to VAT.

Fiscal Year – The 12 #

month period used by a business for accounting and tax purposes.

Going Concern – A business that is considered to be viable and ongoing, r… #

Going Concern – A business that is considered to be viable and ongoing, rather than being wound up or sold off.

Goods – Tangible movable property that can be owned or possessed #

Goods – Tangible movable property that can be owned or possessed.

Group Registration – A registration scheme that allows multiple businesse… #

Group Registration – A registration scheme that allows multiple businesses that are part of the same group to be registered as a single entity for VAT purposes.

Harmonized System – An internationally standardized system of names and n… #

Harmonized System – An internationally standardized system of names and numbers used to classify traded products.

Input Tax – The VAT that a business pays on supplies of goods or services… #

Input Tax – The VAT that a business pays on supplies of goods or services that it receives.

Input Tax Credit – The amount of VAT that a business can claim back from… #

Input Tax Credit – The amount of VAT that a business can claim back from the government on its input tax.

Intra #

Community Supply – A supply of goods or services that takes place between businesses in different EU Member States.

Invoice – A document that provides evidence of a supply of goods or servi… #

Invoice – A document that provides evidence of a supply of goods or services and shows the VAT that is due.

Marginal Scheme – A scheme used in some countries for second #

hand goods, works of art, and antiques, where the VAT is calculated as a percentage of the difference between the selling price and the purchase price.

Micro Business – A very small business that is below a certain size thres… #

Micro Business – A very small business that is below a certain size threshold, as defined by the VAT legislation.

Output Tax – The VAT that a business charges on its supplies of goods or… #

Output Tax – The VAT that a business charges on its supplies of goods or services.

Place of Supply – The location where a supply of goods or services is con… #

Place of Supply – The location where a supply of goods or services is considered to take place for VAT purposes.

Registration Threshold – The annual turnover threshold above which a busi… #

Registration Threshold – The annual turnover threshold above which a business is required to register for VAT.

Reverse Charge – A mechanism used in some countries to shift the responsi… #

Reverse Charge – A mechanism used in some countries to shift the responsibility for VAT accounting from the supplier to the customer for certain supplies.

Services – Intangible goods or rights that can be owned or possessed #

Services – Intangible goods or rights that can be owned or possessed.

Single Market – The EU's internal market, which allows the free movement… #

Single Market – The EU's internal market, which allows the free movement of goods, services, capital, and labor between Member States.

Small Business – A business that is below a certain size threshold, as de… #

Small Business – A business that is below a certain size threshold, as defined by the VAT legislation.

Supplies – The provision of goods or services #

Supplies – The provision of goods or services.

Taxable Person – A person or business that is required to register for VA… #

Taxable Person – A person or business that is required to register for VAT and account for VAT on their supplies.

Taxable Supplies – Supplies of goods or services that are subject to VAT #

Taxable Supplies – Supplies of goods or services that are subject to VAT.

Threshold – The annual turnover threshold above which a business is requi… #

Threshold – The annual turnover threshold above which a business is required to register for VAT.

Triangulation – A situation where three parties are involved in a single… #

Triangulation – A situation where three parties are involved in a single supply chain, with each party being located in a different EU Member State.

Value Added Tax (VAT) – A consumption tax that is levied on the value add… #

Value Added Tax (VAT) – A consumption tax that is levied on the value added to goods and services at each stage of the production and distribution process.

Zero #

Rated Supply – A supply of goods or services that is subject to VAT at a rate of 0%.