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Value added tax

Posted 23 June 2015 under Tax Questions



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VAlue added TAx says:
9 June 2015 at 7:54

Using an example , explain the basic principal of value added Tax?

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TaxTimTaxTim says:
9 June 2015 at 8:04

Value Added Tax is a consumption tax on the final user who consumes the goods or services. So a company buys stock for R100 and is charged R114 which includes the 14% VAT. They then sell that stock for a profit at a price of R200 and add VAT of 14% making it R228 charged to the final consumer who is now paying R28.

The company pays over the R28 on behalf of the consumer and receives R14 back for the VAT they paid as they are not the final consumer. The company makes a profit of R100 and doesn't really get affected by the VAT as they are not the final consumer.


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