Basic Features Of VAT Part Three

Tax on consumption idea and territorial connection

The directives issued at European level understand VAT explicitly as a consumption tax. The common VAT system is based on the principle that taxation takes place in the country of actual consumption.

The concept of consumption is, however, indefinite. The VAT Directive does not contain an explicit definition of terms. The Excise Duty Directive does not (directly) apply to VAT. From an administrative point of view, it is practically impossible to link VAT directly to consumption. Turnover as an act of commercial transactions, on the other hand, is much easier to record and control due to the associated cash flows compared to consumption. In terms of the collection technique, the VAT system is therefore linked to the turnover of taxable persons (entrepreneurs). Sales are: