Why so many Tax names ? and what do they mean ?

If you are not familiar with Tax the different acronyms and tax names can be intimidating.. While most of the time they refer to the same thing 🙂

We will keep this discussion at a high level and won’t go into the details or rules for each of them.

USA:

This is a Sales & Use Tax Country.

Sales Tax are collected by a Vendor

Use Tax are “self-assessed” by the Customer

Consumer Use Tax is a scenario where the Vendor will collect the Use Tax instead of the customer

Tax in the US are jurisdictional, this means the rates are based on the tax jurisdiction where the transaction happened (primarily Ship To)

US Tax are non-recoverable.

Most of Services are non-taxable in the US while Goods are mostly taxable

Canada:

Canada has a combination of tax types.

gst is a Country (Federal) level Tax and stands for Goods & Services Tax – It is a recoverable Tax (it is also called TPS in Quebec)

pst is a Provincial level Tax and Stands for Provincial Sales Tax it is a non-recoverable Tax

hst is a Country level Tax and stands for Harmonized Sales Tax – it is a recoverable Tax (HST is a merge of GST and PST)

qst is a Provincial Tax only relevant to the Province of Quebec, it stands for Quebec Sales Tax – it is a recoverable Tax(also called TVQ)

They can be combine as such:

HST only

GST only

GST + PST

GST + QST

VAT Countries:

Alright let’s start with the various name for the same Tax 🙂

vat stands for Value Added Tax, it is also called iva (spanish), tva (french) and a few other variation.

vat is mostly a Country level Tax and is a recoverable Tax

VAT non Standard Countries:

Argentina has a VAT system at the country level plus a GIT (Gross Income Tax) on transaction at the State level. Income tax are usually Direct Tax, however in this case, they are treated similar to a transaction tax

China has a VAT system but it also has a Business Tax for some Services. since 2012 they are also some provincial VAT aim at replacing the Business tax

Russia has a VAT system however some rules and reporting requirement make it unique.

India:

this country has a mix of tax based on the type of transaction (Goods vs Services) as well as the fact that transaction are intra or inter state

the main tax are VAT for intra-state transaction, CST (Central Sales Tax) for inter-state transaction and Service Tax

For more details click India Indirect Tax Overview

Brazil:

Taxation in brazil is complex and endebbed in the overall invoicing process.

There are tax at various jurisdiction level (Country, State and Municipality) as well as rules for Goods vs Service and inter-state transaction.

For more details click Brazil Indirect tax overview