Who is eligible to reclaim VAT tax?

The correct answer identifies that only businesses making taxable supplies are eligible to reclaim VAT tax. This is grounded in the principle of VAT, which operates on the basis of ensuring that the tax is ultimately borne by the final consumer.

Businesses that engage in taxable supplies can offset the VAT they pay on their purchases (input tax) against the VAT they collect on their sales (output tax). This mechanism allows businesses to reclaim the VAT that they have incurred, as long as their supplies are subject to VAT and they maintain the appropriate documentation.

For example, if a business sells goods or services that are VAT taxable, it can reclaim the VAT it has paid on expenses related to those sales. This creates a more competitive environment and prevents double taxation, as only the end consumer bears the VAT burden.

In contrast, individuals making taxable supplies may not have the legal capacity or requirements to reclaim VAT themselves unless they are registered for VAT purposes. Similarly, registered taxpayers who do not qualify as businesses or whose supplies are exempt from VAT won't be able to reclaim the tax. Exempt sellers are also not included in the reclaim process because they do not charge VAT on their supplies, and thus have no VAT to reclaim.

Overall, the eligibility to reclaim VAT is closely tied to