This article is the third in a special series dedicated to VAT 🤗.
Are you new to the topic and want to understand everything there is to know about it so you can master your accounting better?
Go 👉 here to discover the basics of what VAT is and 👉 here to learn how to calculate it.
The two types of VAT 🤓
A company is subject to two types of VAT:
| Collected VAT | Deductible or recoverable VAT |
|---|---|
| It represents all the VAT paid by your customers when they buy one of your products or services. It therefore comes from the sales you make, and you as the seller are responsible for paying it directly to the government on dates specific to the nature of the product or service sold. (More info here) |
It represents the VAT you have paid when purchasing goods and services from your suppliers. In other words, deductible or recoverable VAT represents what you paid when you shouldn't have, because you're exempt from it as a business. |
Focus on deductible VAT 🔍
Under what conditions? 🤔
To reclaim this tax, the company must be subject to VAT and meet the following conditions:
- The goods and services purchased are intended for the operation of your business and are not used for private purposes in excess of 90%;
- The amount of VAT is shown on a supporting document, such as an invoice from your supplier (which must also be properly drawn up);
- This VAT is payable to your supplier
Watch out for exceptions! ✋
VAT recovery does not apply to certain purchases:
- Fuel costs for company vehicles
- Company vehicles
- Hotel or accommodation expenses incurred for officers or employees
- Goods sold free of charge or for less than normal value
- Assets used for non-business purposes
How can I reclaim this VAT? 💰
If the amount of deductible or recoverable VAT exceeds that of collected VAT, there is a surplus known as a "VAT credit".
In this case, you have two options 🤑 :
- Offset: you choose to deduct this VAT credit from the VAT due on the next tax return. The advantage of this decision is that it enables you to protect your cash flow for the coming months, provided you already have sufficient cash until the next return.
- Repayment: you choose to request payment of the credit to your account. This can be done in full or in part. The advantage of this decision is that it allows you to restore your cash flow in the short term.
Anytime to your help 💯
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