Value Added Tax or VAT is a tax on the consumption or use of goods and services levied at each point of sale. VAT is a form of indirect tax
Dynamics 365 supports many types of indirect taxes, such as sales tax, value-added tax (VAT), goods and services tax (GST), unit-based fees, and withholding tax.
you can check overview here
This post discusses setup and transaction
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HOW TO IMPLEMENT VALUE ADDED TAX (VAT) IN MICROSOFT DYNAMICS 365?
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