AC41 SYNTHESIS NO.

Value Added Tax (VAT) is a consumption tax on goods and services that is levied at each
stage of the supply chain where value is added, from initial production to the point of sale. The
amount of VAT the user pays is based on the cost of the product minus any costs of materials in
the product that have already been taxed at a previous stage. It is similar to a sales tax in some
respects, except that with a sales tax, the full amount owed to the government is paid by the
consumer at the point of sale. With a VAT, portions of the tax amount are paid by different
parties to a transaction.
Input VAT is VAT which is included in the price when you purchase vatable goods or
services for your business. If you are registered for VAT, you will be able to deduct input VAT
against output VAT in your VAT return. While Output VAT is VAT which you must calculate and
collect when you sell goods and services, provided that you are registered in the VAT Register.
Output VAT must be calculated both on sales to other businesses and sales to ordinary
consumers. The VAT you pay on purchases is normally called “Input Vat”, while the Vat you add
on sales is normally called “Output Vat”.

Mañanita Honeylet M.
BAMM1A