What is the definition of Value Added Tax ( VAT)?

This term is commonly used in Europe and in Africa, But in America, is simply called Tax. A VAT, or Value Added Tax is a form of taxation that's applied to all products that are being sold.  


Example, if a cup of coffee is being sold at $ 15, the tax maybe 8% of that. The tax is applied whenever any value is added to a product, hence the name. An example of VAT is:

  • A technology company buys components for a chip from suppliers, paying Tax or VAT on each component.
  • The consumer buying the groceries also pay VAT or TAX on each item purchased.

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