What is Value Added Tax?
In accordance with European Union Directive 77/388/EEC, Value Added Tax applies only to residents of countries within the European Union (EU). Value Added Tax (VAT) has been in effect for a number of years in Europe, with each of the member countries having their own VAT rates (ranging from 15% to 25%). VAT is assessed and payable at each level of the supplier, manufacturing, wholesaling, and retailing process, where ultimately the consumer pays the final VAT. Different from traditional sales tax, VAT is also assessed on services whereas most sales taxes are typically only assessed on goods and products.
If you operate a business and have a valid VAT ID number, you may be exempt from VAT fees. The exemption applies only if you are making a purchase for a business that is located within the European Union (EU) that has a current VAT ID. All other purchases by residents within the EU are subject to the Value Added Tax.
For more information on Value Added Tax, see the Taxation and Customs Union page of the European Commission site.