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(Note that businesses can offset their VAT liability with the VAT they paid for services/goods received.) this is misleading, it's like saying you can get a sa
by disiplus 6y ago
(Note that businesses can offset their VAT liability with the VAT they paid for services/goods received.)
this is misleading, it's like saying you can get a salary as a worker. you get the salary. there is no "you can"
the same is true for VAT, the amount you owe is the difference between the tax you paid for the service/goods you bought and the tax you collected when you sold.
at the end of the month or what ever other period you are required to pay taxes the sum is simplified this difference.
with a VAT rate of 25%
if you paid something 125, (100 base + 25 vat) and sold it after for 150 (120 base + 30 VAT) you owe the (30-25) = 5.
In the accounting software the tax rate for every line item is entered when creating the entry. So at the end of the month its easy to make a report.
- gamblor956 6y agoNo, I specifically said "can" because you only get to offset input VAT if you satisfy the procedural requirements for doing so; it's not automatic. In contrast, output VAT is automatic and will be imputed by the taxing authority whether or not you file VAT returns.
- disiplus 6y agoThere are no procedural requirements that i know of, it's how the VAT system works. The only difference is are you in VAT system or not (there are rules when you have to go in). If you are not in the system you cannot offset the VAT but you are not required to collect it also, so whatever you charge you keep . Please give me the example where you are required to collect but cannot offset. There are per countries some special cases, for some type of items, where the full amount will not be recognized but those are exceptions.