Types of Value Added Tax (VAT)
The types of VAT are determined on the basis of treatment of capital goods of a firm. Input tax paid for capital goods is allowed or not is the fundamental question in the study of types of VAT.
There are three types of VAT, they are:
* Consumption type
* Income type
* Gross National Product (GNP) type
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Consumption Type VAT
Under consumption type VAT, all capital goods purchased from other firms, in the year of purchase, are excluded from the tax base while depreciation is not deducted from the tax base in subsequent years. The base of tax is consumption since investment is relieved from taxation under this type.
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Income Type VAT
The income type VAT does not exclude capital goods purchased from other firms from the tax base in the year of purchase. This type, however, excludes depreciation from the tax base in subsequent years. The tax falls both on consumption and net investment. The tax base of this type is the net national income.
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GNP Type VAT
Under this type, capital goods purchased by a firm from other firms are not deductible from the tax base in the year of purchase. It also does not allow the deduction of depreciation from the tax base in subsequent years. Tax is levied both on consumption and gross investment. The tax base of this type is gross domestic product.
Consumption type VAT is widely used. So, by the term ‘VAT’ we basically mean the consumption type VAT.
VAT Refund
You are eligible to claim VAT refunds on certain business related expenses if you are incorporated in any country other than the country from which you wish to claim a VAT refund.
WHICH EXPENSES ARE ELIGIBLE?
The chart overleaf outlines some of the current expenses that are eligible. This includes expenses incurred on hotels, meals, professional fees, car rentals, trade fairs, training courses etc. AVR enables you to reclaim expenses incurred in the past on a retroactive basis.
Current legislation in the E.U. enables an applicant to claim VAT refunds up to six months after the end of the financial year in which the expenses were incurred. In some cases, it may be possible to submit retrospective claims for VAT refunds. Thus, potential exists for a sizeable initial claim.
WHAT DOES AVR DO?
| AVR is a global organization dedicated to the task of providing assistance to companies wishing to reclaim Value Added Tax (VAT) paid on business expenditure. As your appointed VAT Reclaim Agent, AVR will: | |
| • | Determine your firm’s eligibility to reclaim VAT. |
| • | Review and organize all original receipts to assess the extent of your potential VAT refund. |
| • | Where possible, obtain replacements of missing or incorrectly styled invoices. |
| • | Advise and assist in setting up internal procedures compatible with existing policies, thus enabling your company |
| • | to maximize its future VAT reclamation. |
| • | File all necessary documentation to ensure your company’s continued eligibility for VAT refunds. |
| • | Recover VAT from all E.U. member states as well as several other countries on behalf of non-resident companies. |
| • | Collect your invoices through our retrieval service, simplifying your task and ensuring valuable invoices are not missed. |
| • | Assist you with other international VAT enquiries. |
| • | Process all claims and deal with any questions VAT authorities may raise. |
| • | Provide quarterly statements detailing the status of your company’s application and refunds. |
| • | Receive your refund and forward it to you in the currency of your choice/ net of AVR’s contingent fees. |
HOW DOES IT WORK?
All claims for refunds must be supported by original receipts for the business related expenses. AVR will work with your company to establish a method for receipt retrieval that is compatible with your company’s existing procedures.
These receipts along with the necessary documentation will be filed by AVR with the respective authorities. VAT authorities can take up to six months to review a claim. When your claim has been processed, the original invoices will be returned to you.
AVR will send you a payment net of their fee promptly, after receipt of the refund. Payment will be made in the currency of your choice.
HOW MUCH DO YOU PAY?
No refund, no charge.
AVR charges a fee contingent on successful refunds only. There is no processing fee for work done in the preparation of your VAT refund application. If your application is unsuccessful, your company will not be liable for any fee or expenses.
HOW TO OBTAIN YOUR REFUND?
AVR makes the application process simple for your company. You need to file only two documents at the outset and one document annually to become eligible for VAT Refund. AVR takes care of all the other necessary paperwork on your behalf.
INITIAL REQUIREMENT –
- Application Form.
• Letter of Authority (Addressed to each country in which you intend to reclaim VAT on your Co. letterhead)
ANNUAL REQUIREMENT:
STATUS (TAX) CERTIFICATE or letter issued by the local tax authorities must be filed in every country from which you wish to claim a refund. This is a simple certificate that states only the name, address and permanent account number of the company.
DEADLINES FOR FILING CLAIMS:
Current legislation enables an applicant to file a claim within the following periods.
Period Cut Off Date
United Kingdom from July 1 through June 30 December 31
All other countries from Jan 1 through December 31 June 30
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