VAT is a tax levied by the government on the purchase of products or services.
VAT is a type of turnover tax that is applied in 136 countries, including most European countries. By order to the European legislator, the Netherlands have known VAT since 1 January 1969, Belgium since 1971. This was preceded by turnover tax, in the form of a cumulative cascade system.
Manufacturers and suppliers increase the price of a product or service with the VAT amount, which they in turn must pay to the government. To that end, the company must usually file a return every quarter and pay the amount.
If an error occurs, a supplementation report can be submitted. This way it is as if the company pays this tax, but it is in fact the consumer paying it by means of a price surcharge. The consumer would pay less without VAT.
Turnover tax always operates regressively when there is only a single tariff, as the poor consume a larger part of their income. In the Netherlands, luxury goods, which fall outside life’s basic needs, are subject to 21% VAT (e.g. CDs or jewellery; the increased rate). In the Netherlands, less luxury products, (foodstuffs such as bread) are subject to 6% VAT; the reduced rate.
Most services are also subject to 21% VAT. Some products and services are (fully or partially) exempt. A zero rate is also an option. The zero rate and exemption are not the same. In the case of performances that can be taxed at the zero rate, the company is entitled to a deduction of the input tax, while an exempted company is not entitled to that.
The (fiscally relevant) difference between the two therefore becomes apparent mainly if, following this link in the production column, there is another like that has to send invoices with VAT. Instead of calling it a zero rate, it would be better to call it exemption with the right to deduct input tax.
In Belgium, a total of nearly 700,000 persons and companies are registered for VAT. The rates are 6%, 12% and 21%. The revenue of VAT is collected by the federal public services for finances and is then distributed across the EU, the federal state, the communities and social security. This is done according to a predetermined formula, so-called allotment.
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