Value Added Tax (VAT) is the world's most widespread consumption tax — used by over 170 countries including the entire European Union, UK, and much of Africa and Asia. If you do business internationally, understanding VAT is essential.
Follow a product from raw material to final consumer (20% VAT rate):
Farmer sells raw cotton. No input VAT to claim.
Manufacturer adds value. Claims €20 input, remits only €20 net.
Wholesaler adds margin. Claims €40 input, remits €20 net.
Final sale. Consumer pays €480 total. Retailer remits €20 net.
Total Government Revenue: €20 + €20 + €20 + €20 = €80
= 20% of final consumer price (€400). Each business only remits VAT on its "value added."
| Country | Tax Name | Standard Rate | Reduced Rates |
|---|---|---|---|
| Ireland | VAT | 23% | 13.5%, 9%, 4.8%, 0% |
| UK | VAT | 20% | 5%, 0% |
| Australia | GST | 10% | 0% (food, health, education) |
| India | GST | 18% | 5%, 12%, 0% + 28% luxury |
| Malaysia | SST | 10% (Sales) / 8% (Service) | 5%, 0% exemptions |
| Singapore | GST | 9% | 0% (financial services, exports) |
| Germany | VAT (MwSt) | 19% | 7% |
| France | VAT (TVA) | 20% | 10%, 5.5%, 2.1% |
EU, UK, Africa
India, Australia, SG, MY
USA (state-level)
VAT is a multi-stage consumption tax — collected incrementally at each step, with businesses only remitting the value they added
170+ countries use VAT or its equivalent (GST, SST). The USA is the major exception (uses state-level sales tax)
Input VAT credit = VAT paid on purchases. You only pay the net difference to tax authorities
Registration thresholds vary by country — once crossed, VAT collection and filing become mandatory
Cross-border VAT is complex — exports are zero-rated, imports attract VAT, and reverse charge may apply for services
You now understand GST, Income Tax, TDS, and VAT — the four pillars of business tax compliance. Continue with Business Finance or automate your tax compliance with Laabam.One.