Financial

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Financial Accounting Unit 1. VAT Pepi Ayala Marín Bachelor in Business Administration 2 The Value Added Tax (VAT) is an indirect tax meant to tax consumption. Whenever businesses or individuals purchase a good or a service, they have to pay VAT in addition to the Price. 1. VAT Price: 200€ VAT: 42€ Total: 242€ Price: 300€ VAT: 63€ Total: 363€ 3 1. VAT 1.When companies sell goods or services they must charge VAT to their customers. This “extra” price (VAT) must be paid to the tax authorities. 2. When companies purchase goods or services, they must also pay VAT. However, they have the right to reclaim the VAT they have paid to the authorities. 3. Instead of paying the total amount of VAT charge and claim the amount of VAT, businesses deduct the VAT paid from the VAT charge. The tax only affects the value added to good and services. 4 1. VAT 4. Final customers must also pay VAT for the goods and services they purchase. Final customers cannot deduct the VAT they pay. VAT is considered as a consumption tax that taxes mainly final consumers. 5 1. VAT EXERCISE 1. Company A produces modelling clay. On the 4th February it sells 1.000€ of that clay to company B, a dealer. Company B sells that...