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Let's get practical and walk through some *examples of VAT* in action. Seeing it in action can make it a lot clearer. Let's say you're buying a new smartphone. The price tag on the phone is, let's say, 600 euros. This price already includes the 20% VAT. So, the cost of the phone without VAT is 500 euros, and the VAT amount is 100 euros. The consumer pays the full 600 euros, and the retailer then remits the 100 euros of VAT to the government. Consider a restaurant bill. You're out for dinner and the total bill comes to 100 euros. This price also includes amy baking company net worth the 20% VAT. This means that 83.33 euros goes to the restaurant for their services and the ingredients, while 16.67 euros is remitted to the government as VAT. And then, there's a consulting service. Let's say a consultant charges 1,000 euros for their services. This is, again, including the 20% VAT. That means the consultant gets 833.33 euros, and 166.67 euros goes to the government. Businesses that are VAT registered can often reclaim the VAT they've paid on their business expenses. Let's say the restaurant, for example, has to buy some new equipment and they pay 240 euros. They can reclaim the VAT of 40 euros.
