WHAT IS VALUE ADDED TAX (VAT)?
A value-added tax (VAT) or also General Sales tax (GST) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the value added to a product, material, or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs.
The purpose of VAT is to generate tax revenues to the government similar to the corporate income tax or the personal income tax.
The value added to a product by or with a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products.
IS THE UNIVERSITY OF WISCONSIN SUBJECT TO VALUE ADDED TAX (VAT)?
- Travelers are required to pay all VAT taxes as the UW is not exempt in other countries from VAT or other taxes.
- The UW does not have an institutional Value Added Tax (VAT) number.
- Travelers or departments should not be submitting individual claims to countries for VAT or other taxes on their own since the UW is not exempt in other countries.
- The UW is required to pay all VAT taxes because the UW is not exempt from VAT tax in the United States or other countries. The UW and its employee may not file for exemption from VAT tax in the United States or other countries on their own since the UW is not exempt from VAT tax.
- The UW previously outsourced the Value Added Tax (VAT) collection to a company that would come in and look at its VAT payments to try to recover whatever they could for the UW. This company was under contract to the UW to recover any VAT that its travelers pay. Due to the cost and low recovery rate because of all the country restrictions and limitations, this process was discontinued.
- As an additional note, the Canadian Goods and Services Tax (GST) is a VAT; therefore, the UW is required to pay all GST taxes.