What is a VAT invoice?

A VAT invoice is essential in the context of Value Added Tax (VAT) as it provides crucial information for businesses regarding their tax position. The correct description identifies a VAT invoice as a document that allows businesses to claim input VAT (the VAT that is paid on purchases) and also facilitates the charging of output VAT (the VAT added to sales).

By issuing a VAT invoice, a business must show the VAT amount separately, ensuring clarity in transactions. This is fundamental for businesses that are VAT-registered, as it allows them to reclaim the VAT they have paid on their purchases while also fulfilling their obligation to charge VAT on their sales transactions.

The other choices do not encompass the specific function of a VAT invoice. For example, an invoice summarizing sales made in a month does not specifically relate to the VAT requirements, while a receipt showing the total amount due including VAT lacks the specificity of allowing the recovery of input VAT. Additionally, stating that a VAT invoice is required only for international transactions is misleading, as VAT invoices are necessary for domestic transactions as well to comply with tax regulations.