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It's important to understand that (in simple terms) businesses do not actually pay VAT. VAT is a tax that ultimately burdens consumers, not companies. When a bu
by _7acn 2y ago
It's important to understand that (in simple terms) businesses do not actually pay VAT. VAT is a tax that ultimately burdens consumers, not companies. When a business purchases a product that includes VAT, it initially pays the VAT amount. However, when the same business later issues invoices for its own products or services (also including VAT), it is required to remit the VAT to the tax authorities minus the VAT it has already paid on its own purchases.
In practice, this means that if you sell something with VAT to a company, the VAT component is irrelevant to that company. This is, of course, a simplified explanation, but fundamentally, that's how the system works.
- RhysU 2y agoWho collects the float on the VAT for these intermediate businesses between when they pay it and when they are reimbursed?
- fransje26 2y agoB2B transaction are generally VAT free. In the event that VAT has been paid, the reimbursement goes via the tax authorities.
- RhysU 2y agoHow long do the tax authorities sit on those payments before reimbursing them?
- fransje26 2y agoI don't know about the modalities in all the EU countries, but generally it's an indirect reimbursement, deducting the VAT you payed extra from the VAT you're supposed to hand over to the tax authorities. The readjustments are done monthly.
- locallost 2y agoIt's not real reimbursement, you were reimbursed already when you "added value" and sold the goods or services to someone else for more than you paid for. The money you took contains VAT and most of that you will keep yourself because you paid for it. You will the take the say 20% you collected when you sold goods, subtract the VAT your supplier put on their invoice to you and give the rest to the government. You are in a way reimbursing the government. It's possible to get reimbursed by the government if you spent more money on VAT than you collected yourself - it happened to me as a freelancer if I spent more money on bills but either didn't generate any income or worked for foreign companies and my invoices were VAT free. When all of this happens depends on the jurisdiction I guess. I had to do it quarterly. Some other people I know did it yearly. "Real" companies are probably again different, and different in different countries.