The value added tax (VAT) has been present in society since long before you may think. It began to be used in the Egyptian and Athenian civilizations and after the Second World War VAT was already present in many countries.
VAT has proven to be an excellent way through which the State maintains its coffers and repays it through public policies to the population. Whether you plan to develop commercially or if you already have your own company, it is a tax that you cannot lose sight of.
What is value added tax (VAT) and why is it so important?
When talking about VAT, reference is made to a tax that serves the state to obtain economic resources. These are intended for reinvestment in the country and the maintenance of its normal functions. This implies that from the improvement of public services to the salary of civil servants.
It is precisely for this reason, together with its state nature, that it is regulated by Law 37/1992 and this is what establishes its operation.
In the same way, although the passive subject are the merchants and professionals, who apply an increase in goods and services, it is the entire population who pays. This is the additional percentage that must appear on every invoice.
It is essential to keep in mind that such people only “collect”, and that all that money must be consigned as tax every 3 months. This constant flow of money that allows the exchange of goods and services is precisely thanks to the work of the State and this is its way of continuing to do so.
How many types of VAT are there?
There are three types of value added tax (VAT) on which the percentage applied to the sale price depends. The general, which applies to the vast majority of goods and services, is 21%.
For their part, the reduced and the super-reduced privilege certain areas with 10% and 4%, respectively. The first refers to sales of agricultural products and transportation, while the second refers mainly to medical supplies.
What are the advantages of the value added tax (VAT)?
The advantages have proven to be very broad and profitable, both for the State and for the users themselves. Among the most noteworthy, the great collection capacity that it promotes stands out in the first place.
Likewise, due to its own operation, it supposes a detailed knowledge of the activities carried out. Likewise, it allows certain flexibility with which to tax and deduct certain items to encourage development in specific and general areas.
Since it is an indirect collection mechanism, it does not involve an excessive bureaucratic process as opposed to the high level of collection. Likewise, it involves the entire population in financial and tax policies.
It allows the incorporation of advanced electronic elements, designed for better management of resources and greater ease of use. For the employer in particular, it can favor certain legal deductions according to the type of taxation of a specific item.
What are the disadvantages of the value added tax (VAT)?
Of course, not everything is rosy and VAT involves certain aspects that can generate some inconveniences that at the moment do not exceed the magnitude of its benefits.
The main disadvantage is in the difficulty of defining this tax in a neutral way. In this way, on many occasions the incidence of the tax ends up being higher in low-income sectors.
Also, the collection of the tax is often very complicated with retailers. This is due to both direct evasion and the presumed complexity of keeping adequate accounting records.
