Value-Added Tax - VAT

AAA

DEFINITION of 'Value-Added Tax - VAT'

A type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale. Value-added tax (VAT) is most often used in the European Union. The amount of value-added tax that the user pays is the cost of the product, less any of the costs of materials used in the product that have already been taxed.

VIDEO

Loading the player...

BREAKING DOWN 'Value-Added Tax - VAT'

For example when a television is built by a company in Europe the manufacturer is charged a value-added tax on all of the supplies they purchase for producing the television. Once the television reaches the shelf, the consumer who purchases it must pay the value-added tax that applies to him or her.

RELATED TERMS
  1. Goods and Services Tax - GST

    A Canadian value-added tax levied on most goods and services ...
  2. Taxes

    An involuntary fee levied on corporations or individuals that ...
  3. Flat Tax

    A system that applies the same tax rate to every taxpayer regardless ...
  4. Value Added

    The enhancement a company gives its product or service before ...
  5. Sales Tax

    A tax imposed by the government at the point of sale on retail ...
  6. Tax Rate

    The percentage at which an individual or corporation is taxed. ...
Related Articles
  1. Personal Finance

    Value-Added Tax (VAT)

    Value-added tax, or VAT, is a tax on the added value of a good as it moves through the supply chain to the end consumer. In effect, the tax is levied on the gross margin at each point in the ...
  2. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  3. Fundamental Analysis

    Hamburger Economics: The Big Mac Index

    In theory, PPP stands up much better than it does in reality. Find out how to evaluate currencies according to the price of a Big Mac.
  4. Taxes

    What IRS Form 990 Tells About a Nonprofit

    Want a picture of an organization's activities? This annual form, open to the public, sums up everything from salaries paid to missions accomplished.
  5. Retirement

    The 3 Most Common 401k Rollover Mistakes

    No one is born knowing the tax rules for 401(k)s and IRAs, but only dummies, scaredy cats and suckers don't buckle down to learn them.
  6. Taxes

    Top Reasons to File Separately When Married

    Most of the time, it makes sense for couples to file their taxes jointly. Except for these possible exceptions...
  7. Taxes

    What IRS Form 1023 Is Used For

    To be treated as a tax-exempt organization, start by filling out this form.
  8. Taxes

    Late with Your Taxes? Grab IRS Form 4868

    Fill out this form to get a few more months to file your tax return. But remember, April 15 is still the payment due date if you owe taxes.
  9. Taxes

    What IRS Form 8949 Is For

    Selling a painting or that lake property? Disposing of your fossil fuel stocks? You need to know about this IRS form.
  10. Mutual Funds & ETFs

    ETF Analysis: SPDR EURO STOXX 50

    Learn about FEZ, the Euro Stoxx 50 ETF. FEZ tracks the 50 largest companies in Europe, making it the Dow Jones Industrial Average of Europe.
RELATED FAQS
  1. What are some of the arguments against a value added tax (VAT)?

    Critics of the value-added tax, or VAT, system say that not only is it costlier to implement compared to the ad valorem system, ... Read Full Answer >>
  2. What are some examples of a value added tax?

    A value-added tax (VAT) is a consumption tax levied on products at every point of sale where value has been added, starting ... Read Full Answer >>
  3. What are some of the arguments in favor of a value-added tax (VAT)?

    A value-added tax (VAT) offers several advantages over an income tax or traditional sales tax. It raises needed government ... Read Full Answer >>
  4. What are some of the arguments for and against a Value Added Tax (VAT)?

    A value-added tax (VAT) is a type of consumption tax placed on a product whenever value is added at a stage of production ... Read Full Answer >>
  5. What are the tax incentives or disincentives to vertical integration?

    In certain jurisdictions, such as the countries that are members of the European Union, there is a system of taxation called ... Read Full Answer >>
  6. What is Value-Added Tax (VAT) and who pays it?

    Value-added tax (VAT) is a consumption tax, meaning that it is a tax on the purchase of a product or a service. It is a form ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!