Value Added Tax is a tax on supplies and other services that a business owner carries out against payment within the scope of their business activity.
Basics
Entrepreneurs charge VAT on taxable turnovers and remit it to the tax office. At the same time, they can reclaim the VAT included in incoming invoices under certain conditions. Input VAT deduct.
Value added tax is part of the ongoing Financial accounting and is recorded in the appropriate tax accounts.
Legal framework
Value Added Tax is regulated by law. Businesses are obliged to properly record their taxable sales and declare the tax by the deadline.
Systematic classification
Value Added Tax is related to:
The net result is that the difference between VAT payable and deductible input tax is remitted to or refunded by the tax office.
Key elements
- Taxable turnover
- Deductible input tax
- Tax accounts in accounting
Typical procedure
- Value Added Tax collection on outgoing invoices
- Accounting entry
- Offsetting with input tax
- Submission of VAT Return
Practical relevance
Proper recording of VAT is a prerequisite for correct tax returns. Incorrect bookings or inaccurate account assignments can lead to discrepancies in tax calculations.
Typical sources of error
- Incorrect posting of revenue
- Incorrect deduction of input tax
- Improper invoice details
FAQ
Who has to pay VAT?
Businesses that carry out taxable supplies.
How is it calculated?
Based on the taxable turnover, applying the respective applicable tax rate.
What happens to the input tax?
It is offset against the VAT due.
Conclusion
Value Added Tax is a central element of the German tax system. Its correct recording in financial accounting forms the basis for a proper tax return.
Brasser Accounting Solutions GmbH is a specialised accounting service provider and part of a corporate group with Quint GmbH (tax consultancy/auditing) and Service Place Årjäng AB (Swedish tax office). BAS exclusively performs services according to § 6 No. 3 and 4 StBerG and does not provide tax or legal advice.
