Origin principle

Tax Glossary Definition

Origin principle

The Origin Principle in a Value Added Tax (VAT) system means that goods and services are taxed in the country where they are produced, not where they are finally sold or used. This means the producer pays VAT to their own country, even if the product is exported.

Example: If a German company manufactures machinery and sells it to France, Germany will charge VAT on the machinery because it was produced there. France may then exempt the import or allow credit for the VAT already paid, depending on its tax rules.

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