Value-added tax (VAT) is an indirect tax on consumption. It is collected by companies and paid to the tax authorities, impacting virtually all products and services used daily by consumers. This article provides an overview of VAT and how it works in the tax system.

What is VAT?

VAT, or value-added tax, is a tax applied at every stage of production and distribution. Based on the principle of the value added by companies to their products or services, it is included in the price paid by the end consumer. VAT is an important pillar of modern tax systems, providing a significant source of revenue for states.

How is VAT calculated?

VAT is calculated by applying a percentage to the pre-tax price of the good or service. VAT rates vary according to the nature of the goods or services and are set by the legislation of each country. Certain operations may qualify for reduced VAT or be exempt, depending on the legal framework and public policies in force.

The different VAT rates

In France, for example, there are several VAT rates: the standard rate and reduced rates applicable to certain goods and services, to take account of economic and social objectives. Understanding the application of different VAT rates is essential for companies in terms of invoicing and accounting.

Standard VAT

The standard rate is the normal rate applied to most goods and services. This rate may vary from country to country within the European Union.

Reduced VAT

Reduced rates are applied to certain products or services deemed essential, such as food, books and others, in order to make them more accessible.

The role of VAT in the economy

VAT is a powerful economic tool. It generates revenue for the State while encouraging sensible consumption. Managing it requires sound tax planning and a thorough knowledge of the rules in force, especially for companies operating in several countries.

VAT and businesses

Businesses play a crucial role as VAT collectors on behalf of the State. They must pay VAT on their purchases and collect it on their sales, the difference constituting the net VAT to be repaid or recovered. This implies careful management and the need to consult specialist tax lawyers to ensure compliance with complex regulations.

VAT declaration and payment

Companies are required to declare input and output VAT to the tax authorities at a frequency determined by law. This step, essential to the smooth running of the company, is often the source of many questions, and is sometimes the subject of a tax dispute in the event of disagreement with the tax authorities.

Frequently asked questions

Here is a list of frequently asked questions about VAT.

Who is liable for VAT?

Any entity carrying out an economic activity independently, whatever its legal status, objectives or results, is in principle subject to VAT. There are, however, specific exceptions and exemptions.

What happens in the event of late payment of VAT?

Penalties for late payment may be applied, and the VAT debt is often increased. Precise management of payment deadlines is crucial to avoid additional costs.

Is it possible to reclaim VAT on business purchases?

Yes, in most cases, VAT paid on business purchases can be reclaimed, provided that these purchases are directly linked to the company’s VAT-registered economic activity.

The complex paths of taxation are not a problem for us.
Gain peace of mind with experts, plan your strategy!

Articles similaires

Découvrez nos articles similaires, mais n’oubliez pas de nous contacter, c’est mieux !

Tax domicile

Tax domicile Domiciliation is a key concept in the field of taxation. It determines the country in which an individual or legal entity is subject to tax. This concept is essential to understand for...

Tax Return

Tax Return The tax return is a must for many taxpayers. It is used as the basis for calculating income tax, and for declaring income received during the previous tax year to the tax authorities....

Tax Base

Tax Base The world of taxation is littered with technical terms, among which "tax base" is a central concept. This key element determines the extent of the tax contribution applied to both...

Progressive Tax Schedule

Progressive Tax Schedule Income tax is a central element of the French tax system. Its structure, based on a progressive scale, aims to balance citizens' contributions according to their financial...

Tax Shield

Tax Shield The subject of taxation is often hotly debated, as much for its direct impact on individual purchasing power as for its essential role in the functioning of the State. Among tax...

Tax base

Tax base The tax base is a central term in the field of taxation, but one that often remains unexplained to the uninitiated. Understanding this concept is essential to grasping how taxes and fiscal...

Tax credit

Tax credit In the complex world of taxation, various mechanisms enable taxpayers to reduce their taxes or benefit from certain advantages. One such mechanism, known in France until 2005, is the...


Unitaid Unitaid is an international initiative that plays a unique and strategic role in the global healthcare system. Founded in 2006, this organization uses innovative financing methods to improve...