• The VAT is a unique tax system.pieces image by matteo NATALE from Fotolia.com
  
  The Value Added Tax is a European Union consumption tax added to goods and services and most items bought and sold for use and consumption in the European Union. It applies to imports into the European Union, but not exports out of the EU. There are a variety of rules and regulations associated with the VAT, a tax paid directly to revenue authorities by the taxable person (the person who sold the goods).
  
  

How Rates Are Charged

• The Value Added Tax is an amount added to the cost of any item covered within the definition of goods outlined by the VAT guidelines. It is a tax added to an item at each step of manufacture and production based on the item's estimated market value. The final VAT for a product is the sum of the overall tax paid at each stage of production and distribution.
  
  All merchants are required to carry a VAT number and clearly show how much VAT they are charging the customers before any sales can be made.
  
  

Actual Rates

• The VAT rates change based upon the European Union country of origin, as well as whether or not it is a type of product that carries an extra fee attached. As a general rule, the only broad law that governs the percentage rates is that the standard VAT rate must be at least 15 percent of the total sale price. However, given the fact that many European Union countries have separate rules for specific items, the rate can sometimes go as high as 20 percent or more depending on where the item originated. A full list can be found at the main VAT website.
  
  

Exemptions

• There are certain situations when items are exempt from the VAT. For example, certain activities related to the public interest like medical care and school education, as well as humanitarian and charity/nonprofit interests are exempt from paying VAT. Postal services are also currently exempt from the VAT, but various countries often bury a "hidden" VAT in their services rendered by charging customers for the supplies it uses to ship items, such as boxes and vehicle costs. There is also a transitional VAT system in place which allows for special exemptions when related to sales to other EU member states.