Glossary:Value added tax (VAT)
From Statistics Explained
The value added tax, abbreviated as VAT, in the European Union is a general, broadly based consumption tax assessed on the value added to goods and services. It applies more or less to all goods and services bought and sold for use or consumption in the EU; goods sold for export or services sold to customers abroad are normally not subject to value-added tax. VAT is charged as a percentage of price, meaning that the actual tax burden is visible at each stage in the production and distribution chain.
EU Directive 2006/112/EC, in effect since 1 January 2007, is the main piece of EU legislation relating to VAT. It guarantees that the VAT contributed by each Member State to the Community's own resources can be calculated, while allowing Member States many possible exceptions and derogations from standard VAT coverage. Because the Directive only sets a minimum 15% fixed rate until 31 December 2010, rates vary between 15 % and 25 % in Member States. There are also several temporary derogations, for example zero VAT rates for some products in the United Kingdom and Ireland.
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