VAT Liability: Who is Obligated to Pay?
Understanding VAT Liability
Value-added tax (VAT) is a type of indirect tax levied on goods and services consumed in a country. It is typically paid by the end consumer but collected by businesses that engage in the supply or sale of those goods or services.Identification of Taxable Persons
In most jurisdictions, VAT liability is imposed on taxable persons. These include individuals, legal entities, or non-taxable legal persons that have been identified for VAT purposes. Identification can occur voluntarily or through mandatory registration based on specific criteria, such as exceeding a certain turnover threshold.Responsibility for VAT Payment
According to the common system of VAT established by the European Union, the following entities are responsible for paying VAT:Taxable Persons
* Any taxable person who makes taxable supplies of goods or services within the country.Non-taxable Legal Persons
* Any non-taxable legal person that is identified for VAT purposes. It's important to note that liability for VAT payment extends beyond the original supplier or seller. Subsequent entities in the supply chain, including intermediaries, may also be responsible for collecting and remitting VAT to the relevant tax authorities.
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