By admin 
VAT collected and deductible, base exemption, VAT credit… You have trouble finding your way through all this jargon but know full well that you can’t ignore it? Let’s dissect it all together: definition, applicable rates, companies subject to VAT , how it works… VAT will no longer hold any secrets for you!
VAT: our simple definition
VAT ( value added tax) is an indirect tax : it is not directly collected by the State, unlike income tax, housing tax or property tax. It is added to the price of the product or service offered and is defined as follows:
Price excluding tax ( HT ) + value added tax ( VAT ) = price including all taxes ( TTC )
What is VAT used for?
VAT is a particularly lucrative tax. It is also the leading source of income in terms of tax since it concerns the majority of sales and services. In 2014, VAT brought in the equivalent of 50% of tax revenue while income tax brought in a quarter. For example, one point of VAT at 20% brings in 6.5 billion euros.
The advantage of VAT over other taxes such as income tax or corporate tax is that those who pay it (companies) are not those who bear it (consumers). Thus, the consumer is liable for this tax without being legally liable for it.
Finally, the rules applicable to VAT are harmonised throughout the European Union. The benefit? Simplifying trade between countries without having to worry about the rules applicable within the country concerned..
How is VAT calculated and what are the rates?
There are 4 different rates that apply depending on the nature of the product or service offered.
The standard rate (20%) is levied on most products or services;
The intermediate rate (10%) concerns catering, prepared food products and transport;
The reduced rate (5.5%) applies to basic necessities such as food or energy;
And the super-reduced rate (2.1%) applies to the press sector, reimbursed medicines and the television license.
When does VAT apply?
It is aimed at managers of SA, SASU, SAS or SARL and micro-entrepreneurs who have exceeded the maximum annual turnover threshold. This threshold is €94,300 for a commercial activity and €36,500 for a service provision or a liberal activity. Below this threshold, you are not liable for VAT and you benefit from what is called the VAT exemption .
There is, however, one exception… If your turnover is between the exemption threshold and the tolerance threshold for 2 consecutive years, you will be liable for VAT the following year. The exemption thresholds for VAT purposes are €85,800 for a trade or accommodation activity and €34,400 for a service provision activity.
In short, for a service provision activity, if your annual turnover is between €34,400 and €36,500 for two consecutive years, you will have to pay VAT in the 3rd year.
It is aimed at managers of SA, SASU, SAS or SARL and micro-entrepreneurs who have exceeded the maximum annual turnover threshold. This threshold is €94,300 for a commercial activity and €36,500 for a service provision or a liberal activity. Below this threshold, you are not liable for VAT and you benefit from what is called the VAT exemption .
There is, however, one exception… If your turnover is between the exemption threshold and the tolerance threshold for 2 consecutive years, you will be liable for VAT the following year. The exemption thresholds for VAT purposes are €85,800 for a trade or accommodation activity and €34,400 for a service provision activity.
In short, for a service provision activity, if your annual turnover is between €34,400 and €36,500 for two consecutive years, you will have to pay VAT in the 3rd year.