In the context of value-added tax, who bears the formal incidence?

In the context of value-added tax, who bears the formal incidence?

• A. The customer
• B. The government
• C. The seller
• D. The tax authority

Answer: (C)

In VAT, the formal incidence means who is legally responsible to account for the tax to the tax authorities. The seller is obligated to collect VAT on sales (output tax) and to deduct VAT paid on purchases (input tax), then remit the net amount to the tax authority. The customer may bear the economic burden through higher prices, but the legal liability to pay and report the tax rests with the seller.

In VAT, the formal incidence means who is legally responsible to account for the tax to the tax authorities. The seller is obligated to collect VAT on sales (output tax) and to deduct VAT paid on purchases (input tax), then remit the net amount to the tax authority. The customer may bear the economic burden through higher prices, but the legal liability to pay and report the tax rests with the seller.