page_title: Value-added tax
section_title: Overview
hierarchical_section_title: Value-added tax / Overview
caption_attribution_description: English: Belgian VAT receipt Nederlands: Belgische BTW kwitantie Français&#160;: Facture TVA belge Deutsch: Belgische Mehrwertsteuerrechnung
context_page_description: A value-added tax, known in some countries as a goods and services tax, is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution or sale to the end consumer. If the ultimate consumer is a business which collects and pays to the government VAT on its products or services, it can reclaim the tax paid. It is similar to and is often compared to a sales tax.
  VAT essentially compensates for the shared service and infrastructure provided in a certain locality by a state and funded by its taxpayers that were used in the provision of that product or service. Not all localities require VAT to be charged, and exports are often exempt. VAT is usually implemented as a destination-based tax, where the tax rate is based on the location of the consumer and applied to the sales price. The terms VAT, GST, and the more general consumption tax are sometimes used interchangeably. VAT raises about a fifth of total tax revenues both worldwide and among the members of the Organisation for Economic Co-operation and Development.
context_section_description: The amount of VAT is decided by the state as a percentage of the price of the goods or services provided. As its name suggests, value-added tax is designed to tax only the value added by a business on top of the services and goods it can purchase from the market.
  To understand what this means, consider a production process (e.g., take-away coffee starting from coffee beans) where products get successively more valuable at each stage of the process. Each VAT-registered company in the chain will charge VAT as a percentage of the selling price, and will reclaim the VAT paid to purchase relevant products and services; the effect is that net VAT is paid on the value added. When an end-consumer makes a purchase subject to VAT—which is not in this case refundable—they are paying VAT for the entire production process (e.g., the purchase of the coffee beans, their transportation, processing, cultivation, etc.), since VAT is always included in the prices.
  The VAT collected by the state from each company is the difference between the VAT on sales and the VAT on purchase of goods and services upon which the product depends, i.e., the net value added by the company.
caption: A Belgian VAT receipt
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