VAT glossary: key terms explained
Plain-language definitions of the VAT terms you meet on invoices, returns and calculators. VAT is called IVA in Italy, MwSt in Germany, TVA in France and BTW in the Netherlands — the concepts below apply across all of them.
- VAT (Value Added Tax)
- A consumption tax added at each stage of the supply chain, ultimately paid by the final consumer.
- Net price (ex-VAT)
- The price before VAT is added — the taxable amount.
- Gross price (inc-VAT)
- The price after VAT is added — the total the consumer pays.
- Standard rate
- The default VAT rate applied to most goods and services in a country.
- Reduced rate
- A lower VAT rate for specific categories such as food, books or medicine.
- Zero-rated
- Taxable supplies charged at 0% VAT; the seller can still reclaim input VAT.
- Exempt
- Supplies with no VAT charged and usually no input VAT recovery — different from zero-rated.
- Reverse charge
- A mechanism shifting VAT accounting from the supplier to the customer, common in cross-border B2B.
- Input VAT
- VAT a business pays on purchases, usually recoverable against output VAT.
- Output VAT
- VAT a business charges on its sales and remits to the tax authority.
- Registration threshold
- The turnover level above which a business must register for VAT.
- Taxable person
- Any individual or entity carrying out economic activity subject to VAT.
- VAT number
- A unique identifier for a VAT-registered business, required for B2B invoicing in the EU.
- Place of supply
- The country where a transaction is taxed, which determines which VAT rules apply.
Related tools
Definitions are indicative. Always verify with official sources.