How to Collect VAT
In the European Union, Valued Added Tax is a national tax that is charged on the purchase of products and services. Even though the concept of VAT is uniform throughout the European Union, it is the individual member states that are responsible for setting VAT rates, refunding excess VAT payments and collecting VAT within their national territories. VAT is paid by both consumers and businesses, with the difference that VAT-paying businesses may offset the VAT they have paid with the VAT they have collected.
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Instructions
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VAT Collection for Businesses
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Register for VAT with the national body responsible for VAT collection in your country, because you must be registered for VAT in order to collect it. In the United Kingdom, the body responsible for VAT collection is Her Majesty's Revenue and Customs; in Ireland, it is Revenue; and in Spain, the Agencia Estatal de Administración Tributaria.
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2
Familiarize yourself with all the products and services offered by your business. If you do not already have a list with descriptions, prices and product codes for all the products and services you sell, create a list now.
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3
Obtain a list of the current VAT rates. Since VAT rates are set by individual member states in the European Union, you will need to consult the national body responsible for VAT collection in your country for the latest VAT rates.
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4
Create a master product list. This list should include all the products and services your business offers, along with product codes, individual descriptions, current prices, the prevailing VAT rate to be charged, the amount of VAT to be charged in pounds or euros and the price of the product with VAT included.
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5
Establish business processes for the collection of VAT. Instruct your sales staff to charge VAT according to your master product list. Following the cash register's instruction manual, program the cash registers to charge VAT according to your master product list as well as to list the details of the VAT charged on the receipt or invoice.
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Keep and maintain VAT records and proof. You will need to record your sales, proof of the VAT you collected from customers as well as proof of the VAT you paid to others when you bought business supplies or made business-related purchases. This will later help you determine the amount of VAT tax liability you will be required to pay to the tax authorities.
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