SAMAR HUSSAIN’s Post

Understanding Value Added Tax: Comprehensive Guide for Businesses and Consumers Value Added Tax (VAT) is a widely implemented consumption tax that applies to goods and services at each stage of production or distribution. It is a critical aspect of the tax system in many countries, impacting both businesses and consumers. Understanding Value Added Tax is essential for compliance and effective financial planning. What is Value Added Tax? Value Added Tax, commonly referred to as VAT, is a tax levied on the value added to goods and services at each stage of production or distribution. Unlike a sales tax, which is only applied at the point of sale to the end consumer, VAT is collected incrementally at each stage of production and distribution. Each business in the supply chain charges VAT on its sales and can reclaim VAT on its purchases, ensuring that the tax is ultimately paid by the end consumer. For businesses, VAT compliance involves registering for VAT, charging the correct amount of VAT on sales, maintaining accurate records, and submitting regular VAT returns to the tax authorities. Failure to comply with VAT regulations can result in significant penalties and damage to a business's reputation. Ho... #businesses #consumers #pricing #profitability #taximplications

what is value added tax VAT Value Added Tax (VAT) is a consumption tax that is added to the price of goods and services at every stage of the supply chain, from production to the point of sale. It is a type of indirect tax that is based on the value added at each stage of production or distribution. VAT is typically charged as a percentage of the final price of the product or service and is collected by businesses on behalf of the government. The aim of VAT is to generate revenue for the government and to ensure that the tax burden is distributed fairly across the economy. For example, if there is a 20% VAT on a product that costs $10, the consumer will end up paying a price of $12. Value Added Tax vs. Sales Tax Sales tax is very similar to VAT, with the key difference being that sales tax is assessed only once at the final stage of the purchase. Unlike VAT, which is assessed at each stage of purchase/production and paid by every successive buyer, sales tax is paid only once by the final consumer. A key advantage of VAT over sales tax is that the former can allocate the tax amount to different stages at production based on the value added at that stage. Since sales tax is only paid once by the final buyer, one cannot measure the value added at each production stage. It makes it difficult to track and allocate the sales tax to specific stages of production.

Tax Tip Thursday: If you run a business or are part of the finance team, understanding VAT is crucial. VAT, or Value-Added Tax, is a consumption tax placed on products at every stage of production and distribution. But who ultimately pays it, and how does it impact your business operations? #taxtip #valueaddedtax #VAT

Take a look at Kintsugi’s newest guide to "What is the Difference Between Sales Tax and VAT: What Sets Them Apart?" Read more here: https://lnkd.in/edRNZzty 1️⃣ Definition: Sales tax and VAT are both consumption taxes, but they apply differently. Sales tax is added at the point of sale, while VAT is applied at each stage of production. 🛒 2️⃣ Calculation: Sales tax is a percentage of the final sale price. VAT is calculated at each production stage based on value addition. 📊 3️⃣ Impact on Businesses: Sales tax is straightforward but requires careful tracking. VAT involves more documentation but allows for tax credits. 🧾 4️⃣ Global Perspective: Sales tax is common in the US, while VAT is prevalent in Europe and other parts of the world. 🌍 5️⃣ Compliance: Businesses must understand local tax laws to ensure compliance and avoid penalties. Regular updates and accurate record-keeping are crucial. 📚 6️⃣ Customer Experience: The way taxes are applied can affect pricing and customer perception. Clear communication helps in managing customer expectations. 💬 💬 Join the Kintsugi's Discussion: How is your business navigating these challenges? Follow Kintsugi for more sales tax tips every week and to share your strategies and insights on Sales Tax and VAT! #Ecommerce #SalesTax #VAT #BusinessInsights #TaxCompliance #Kintsugi #BusinessOperations #SmallBusinessTips #FinanceManagement #BusinessStrategy

GST (Goods and Services Tax) and VAT (Value Added Tax) are both consumption taxes, but they differ significantly in scope, application, and administration. Key Differences • Scope: • GST applies to both goods and services, providing a comprehensive tax structure. • VAT is primarily levied on goods, with services often taxed separately. • Taxable Base: • GST taxes the entire value of goods and services at each stage of production and consumption. • VAT taxes only the value added at each stage of production. • Cascading Effect: • GST aims to eliminate the cascading effect of taxes, allowing businesses to claim input tax credits for taxes paid on inputs. • VAT may still suffer from cascading effects, as it does not allow for the same level of offsetting. • Administration: • GST is administered both centrally and by states, ensuring uniformity across the country. • VAT is typically administered by state governments, leading to variations in rates and regulations across different states. • Implementation: • GST was implemented in India on July 1, 2017, replacing various indirect taxes including VAT. • VAT was introduced earlier, in India on April 1, 2005, and is still applicable to certain goods. Some concepts in new laws are often derived from older principles. Here, I want to share Vinit's post on VAT and explain how partial exemption works. Thank you, Vineet Sampat , for sharing this link. Please read the post, share it if you like, follow my channel, and if you are also writing a blog or LinkedIn post, send me any one link in a direct message so I can post it in my network as well. Channel link is in the first comment. Detail about my initiative is in the second comment. You can feel free to participate in my 30 days initiative.

𝐀𝐫𝐞 𝐲𝐨𝐮 𝐢𝐧𝐜𝐮𝐫𝐫𝐢𝐧𝐠 𝐕𝐀𝐓 𝐜𝐨𝐬𝐭𝐬 𝐨𝐧 𝐲𝐨𝐮𝐫 𝐩𝐚𝐫𝐭𝐢𝐚𝐥𝐥𝐲 𝐞𝐱𝐞𝐦𝐩𝐭 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬? 𝐔𝐧𝐝𝐞𝐫𝐬𝐭𝐚𝐧𝐝𝐢𝐧𝐠 𝐩𝐚𝐫𝐭𝐢𝐚𝐥 𝐞𝐱𝐞𝐦𝐩𝐭𝐢𝐨𝐧 𝐫𝐮𝐥𝐞𝐬 𝐜𝐚𝐧 𝐡𝐞𝐥𝐩 𝐲𝐨𝐮 𝐨𝐩𝐭𝐢𝐦𝐢𝐬𝐞 𝐕𝐀𝐓 𝐫𝐞𝐜𝐨𝐯𝐞𝐫𝐲 💡 What Does it Mean? The partial exemption is a specific provision that enables companies making taxable and exempt supplies alike to recover part of Input tax credit they bear on their purchases. 💡 When is it due? Each VAT reporting period (quarterly or monthly) 💡 Why is it needed? Mistakes when calculating VAT can cause tax credits to be inaccurate. If credits are excessively claimed, there can be penalties imposed by the tax authorities whereas if they are under-claimed this leads to higher irrecoverable taxes. Both the scenarios affect profitability of the business. 💡 How does it work? 🔹 Identify VAT on purchases directly linked with either taxable supplies or exempt supplies. The use of tax codes simplifies this task 🔹 Allocate VATs on purchases into three different 'buckets': Green Bucket: Purchases directly related to taxable supplies—fully recoverable VAT. Red Bucket: Purchases linked to exempt supplies—VAT not recoverable at all Yellow Bucket: Purchases serving both purposes —Partial recovery on pro-rata basis. 🔹 Calculate pro-rata % using below formula (also called standard method): Value of taxable supplies/ (Value of taxable + exempt supplies) *100 🔹 If the standard method does not fairly represent business usage, a special method can be designed and used with the approval of tax authority. 🔹 Sum total of amount as per green bucket and computed as per above formula is the total Input VAT to be claimed in the return. 🔹 This VAT is provisionally claimed and adjusted yearly for seasonal supply and variations, known as Annual Adjustment. Partial exemption calculations can be intricate, especially with wide-ranging purchases and recovery methods. By seeking advice from an Indirect Tax professional, businesses can ensure optimal VAT recovery and compliance. #TaxStrategy #VATExemption #VineetIDTtalks #PartialExemption

If you are claiming input VAT in your VAT return to the FTA, make sure the VAT you have been charged is valid. Here's how to check the TRN for your suppliers https://lnkd.in/etqZ3FkZ

Is one of your resolutions to expand your business into Europe? If so, you should be aware of value-added tax (VAT). About 170 countries levy a VAT or a goods and services tax (GST). Having an understanding before your expansion can save time and headaches. https://ow.ly/4C0x50UHHI4

I have seen how WHT (Withholding Tax) and VAT (Value Added Tax) can be a source of confusion and experience less compliance. Let’s see how a bit of strategy can turn them into tools to benefit your business. So, first thing is to understanding the Basics. 👉WHT: This is a tax deducted at the source from payments you make to vendors. You, as the customer, are responsible for deducting and remitting this tax to the tax authority. It's essentially an advance payment on the vendor's income tax. 👉VAT: This is a consumption tax charged on goods and services. As a vendor, you collect VAT from customers and remit it to the government. Secondly, here are some strategy beneficial to you as a Vendor or Customer. 👍Claim Input VAT: Claim eligible input VAT (tax on purchases) on your VAT returns to offset it against your output VAT (tax on Sales). Remember that input VAT can only be claimed on goods and services directly related to your taxable business activities. 👍Understand Exemption Rules: Some goods and services are exempt from VAT. If you provide these, you won't need to charge VAT such as basic food items. While if you are not required to charge VAT on your sales due to #25million threshold. This can be an advantage as it makes your goods or services more affordable for customers. 👍Deduct WHT Accurately: Make sure you are deducting the correct WHT rate for each transaction. To safe you penalty later. 👍Claim the WHT Credit: You can verify your WHT credit status directly on your Tax promax profile. This allows you to confirm the WHT amounts deducted by your customers and remitted to the FIRS. These credits balance are crucial for offsetting your income tax liability when filing your returns. ✍️Let me now illustrate with an example: Gentle Ent. provides IT consulting services to another company Acme Ltd. for ₦1,000,000 (excluding VAT).The applicable VAT rate is 7.5%, and the WHT rate for IT consulting services is 5%. Invoice Breakdown: •Service Fee: ₦1,000,000 •VAT (7.5% of ₦1,000,000): ₦75,000 •Total Invoice Amount: ₦1,075,000 •WHT (5% of ₦1,000,000): ₦50,000 Payment by Acme Ltd: Acme Ltd. will pay Gentle Ent. ₦1,025,000 (₦1,075,000 - ₦50,000). Remittance: •Gentle Ent. will remit ₦75,000 as VAT. •Acme Ltd. will remit ₦50,000 as WHT on behalf of Gentle Ent. As you can see, WHT is calculated on the service fee before VAT is added. Even if VAT was not applicable in this scenario, Acme Ltd would still need to deduct and remit WHT. The decision to charge WHT is based on the nature of the transaction and the vendor's status, not on whether VAT is applicable. I hope this was helpful. #Tax #WHT #VAT