VAT (or value-added tax) essentially means taking a percentage of the value of the goods to the State treasury. Nowadays most goods are subject to the 17% rate, but for some products (such as medicines) the percentage is lower. So the tax is paid directly by the buyer, not the manufacturer.
Subjects to taxation
Not all goods and services are subject to mandatory tax. According to the current legislation, the following products are:
1. Sale of goods or services, as well as the transfer of property or ownership of certain products.
2. The transfer of products for individual needs, though the costs are not taken into account in the calculation process.
3. Construction or installation works.
4. Goods that were imported into the country or subjects of its jurisdiction.
VAT and economy
There is a number of services and works that are not subject to VAT. All of them are described in detail in a special legislative act. Every entrepreneur has a tax liability – the amount of money that s/he pays monthly to the state budget.