Do you need VAT accounting services?

VAT consultants are trained specialists who provide comprehensive tax services to businesses subject to VAT. They can inform businesses about the financial impact of the Goods and Services Tax, as well as the measures taken to offset the impacts. It is essential to hire professionals for VAT accounting.

Before looking for a consultant, let’s start by understanding what VAT accounting means.

What is VAT?

Value Added Tax (VAT), commonly referred to as Goods and Services Tax (GST), is a consumption tax paid on goods in Canada at each stage of the production process, labor and from raw materials to final sale.

VAT is calculated progressively at each stage of the manufacturing process when value is added. However, it is ultimately transferred to the end retail customer. For example, if a product costs $10 but is subject to 30% VAT, the consumer will pay $13.

How does VAT work?

At each stage of the manufacture, distribution and sale of an item, VAT is imposed on the gross profit. At each level, the tax is calculated and collected. This differs from a sales tax system, in which tax is only assessed and paid at the end of the supply chain by the consumer.

Say for example,

Suppose that in the fictional country of Versia, a powder called Herls is manufactured and marketed. The VAT rate in Versia is 10%.

Here’s how VAT would work:

Raw materials are purchased for $2, plus a 20 cent VAT payment to the government of Versia, for a total of $2.20.

The heels are then sold to a store for $5 + 50 cents VAT, for a total of $5.50. Versia only receives 30 cents from the producer, which is the total VAT minus the previous VAT levied by the seller. It should be noted that 30 cents equals 10% of the manufacturer’s $3 gross margin.

Finally, one shop offers heels to customers for $10 plus $1 VAT, for a total of $11. The merchant pays Verisa 50 cents, which equals the total VAT at this point ($1) less the manufacturer’s 50 cent VAT. The 50 cents also represents 10% of the retailer’s Dulce gross margin.

VAT vs sales tax

VAT and sales taxes both have the potential to generate roughly the same amount of money. The distinctions lie in when the money is paid and who pays it.

A VAT, on the other hand, has advantages over a national sales tax. It’s much easier to follow. We know how much tax is levied at each stage of production.

Let’s also understand what the standard VAT accounting regime is

The standard VAT accounting system is a VAT reporting system in which VAT is calculated and paid based on the issue date of invoices.

Businesses must file a VAT return four times a year under the standard VAT accounting system. You must pay the VAT you owe on a quarterly basis. Any VAT return due to you will also be paid quarterly.

Are you looking for a fantastic VAT accountant? Our VAT accounting services are available from the Pearl Lemon team. For more information, please contact us immediately at +1 650-278-4421.

Kristan F. Talley