3 ms·

That's not what is happening. What's happening is that a business gets refunded by the government for any VAT they pay. Alice charges Bob VAT. Alice remits the

That's not what is happening. What's happening is that a business gets refunded by the government for any VAT they pay. Alice charges Bob VAT. Alice remits the money to the tax authorities who then refunds Bob the money they paid. If after paying payroll taxes, the government decided to hand all the money back, that would be VAT. The only one who doesn't get refunded is the final customer.

carlosjobim 2y ago
No, I've been trying to explain that this is a myth. A business has to charge VAT on everything they sell. This VAT is paid by the customer to the business and then by the business to the government. A business also has to pay VAT on everything they buy from other businesses. They get to deduct the difference between these two, and pay what's left. I will give you a very simple example: Consider a business who only purchase products and sell them to consumers for a higher price: Step 1: They buy inventory for a total of €1000. €250 of that is 25% VAT. They have paid a total of €250 in VAT. Step 2: They sell inventory for a total of €1200. €300 of that is 25% VAT. They have charged a total of €300 in VAT. Deducting what they paid from what they have charged, you get €300 - €250 = €50. They have to pay the government €50. And this is for a business who only resells products with a margin. Normally a business tries to minimize their costs and maximize their revenue, meaning that the difference in VAT will be even bigger. I urge you to examine these common myths with a clear mind. It doesn't matter if your family and uncles believe in them or if the people here on HN believe in them. What matters is when your business financials are wrong and you're loosing money unexpectedly because you have believed in something which isn't true.

3 ms·

That's not what is happening. What's happening is that a business gets refunded by the government for any VAT they pay. Alice charges Bob VAT. Alice remits the

by Aloisius 2y ago

carlosjobim 2y ago
No, I've been trying to explain that this is a myth. A business has to charge VAT on everything they sell. This VAT is paid by the customer to the business and then by the business to the government. A business also has to pay VAT on everything they buy from other businesses. They get to deduct the difference between these two, and pay what's left. I will give you a very simple example: Consider a business who only purchase products and sell them to consumers for a higher price: Step 1: They buy inventory for a total of €1000. €250 of that is 25% VAT. They have paid a total of €250 in VAT. Step 2: They sell inventory for a total of €1200. €300 of that is 25% VAT. They have charged a total of €300 in VAT. Deducting what they paid from what they have charged, you get €300 - €250 = €50. They have to pay the government €50. And this is for a business who only resells products with a margin. Normally a business tries to minimize their costs and maximize their revenue, meaning that the difference in VAT will be even bigger. I urge you to examine these common myths with a clear mind. It doesn't matter if your family and uncles believe in them or if the people here on HN believe in them. What matters is when your business financials are wrong and you're loosing money unexpectedly because you have believed in something which isn't true.