This whole discussion seems utterly confusing, so somebody educate me, please!
VAT (Value Added Tax) in Europe
is, like the Canadian Goods and Services Tax (GST) a CONSUMPTION
tax. It is predicated on the notion that any product goes through a series of “owners” as it proceeds through the manufacturing process. At each change of hands along that chain of owners the buyer pays tax at whatever rate obtains. The seller MUST collect the tax and then remit the amount collected to the government
after deducting therefrom the aggregate of taxes
he, some time before, paid on the components of the article sold
. The calculation of amounts in any business is dead simple: Remittance = Total tax collected during the accounting period — Total tax paid to suppliers during the accounting period . The terminology for the latter is “Input Tax Credits”
Ultimately, therefore, the consumer (end user) gets to pay the entire whack, while businesses along the trail of manufacture get to recover whatever taxes
they have paid along the way.
Second hand goods are as subject to tax at the time of sale
as are other goods. The kicker
is that the end user has no way of claiming Input Tax Credits because he does not resell. In practice this all means that the invoice or Bill of Sale
for EVERY change of ownership
must show that VAT has been charged by the seller and must show the actual amount of VAT collected by the seller calculated at the rate obtaining in the country in which the transaction takes place. The seller's invoice will most certainly show the amount of VAT charged, for that is the proof of his entitlement to Input Tax Credits!
A bland wording such as “VAT paid” cuts no ice. The VAT amount charged must be shown.
Am I wrong about that?