Value Added Tax

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A Value Added Tax (VAT) is a national sales tax paid by companies based on the value they add to a product at various stages of production or distribution.

The tax is paid at each stage of production, but a credit is received for tax paid on inputs. For example, assuming a VAT rate of 10%, if a company sold its product for $100.00 and the cost of inputs to make that product were $80.00, they would have to pay $10.00 less an input credit of $8.00 to account for the VAT paid by their suppliers.

See Also