Value-added tax
Implementation

VAT can be accounts-based or invoice-based. All countries except Japan use the invoice method.

Using invoices, each seller pays VAT on their sales and passes the buyer an invoice that indicates the amount of tax paid excluding deductions (input tax). Buyers who themselves add value and resell the product pay VAT on their own sales (output tax). The difference between output tax and input tax is the amount paid to the government (or refunded, in the case of a negative amount).

Using accounts, the tax is calculated as a percentage of the difference between sales and purchases from taxed accounts.
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