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You are answering your own question: companies collect VAT from consumers and pass it on to tax authorities. Then, as the company is VAT-registered what it pur
by mytailorisrich 2y ago
You are answering your own question: companies collect VAT from consumers and pass it on to tax authorities.
Then, as the company is VAT-registered what it purchases is either VAT-free or VAT paid can be deducted from the amount of VAT collected from consumers (as you said).
Bottom line: companies do not pay VAT on their own purchases, they only pass on VAT collected from consumers.
Obviously companies do make actual payments to the tax authorities but the point is that these are not from their own funds, they only effectively act as tax collectors.
- butterknife 2y agoYou are right I suppose. We pay it and then we can get some of it returned.
- bildung 2y agoYou get all of it returned. 100% of the VAT you paid on things you as a company bought you'll get back from the tax office. And when selling products, you'll send 100% of the VAT collected from consumers to the tax office. VAT doesn't affect a company (besides the bookkeeping).
- SJC_Hacker 2y agoIf thats the case, why not just register a business, and make a bunch of purchases so you don't have to pay VAT?
- bildung 2y agoBecause that would be an obvious loophole and has been made illegal almost everywhere (i.e. you can't have a business that isn't aiming for profitability).