The sales tax law regulates the obligation to register sales tax in advance with the tax office. According to the definition, this includes that companies can deduct so-called input tax from their sales tax liability. However, some conditions must be met.
What is input tax?
According to the definition, input tax is the sales tax that is billed to the entrepreneur. He can get this amount back from the tax office as part of the advance VAT return. Entrepreneur A invoices Entrepreneur B for a service or delivered goods; the invoice includes € 500 for the service. The sales tax is listed separately (19%), i.e. 95 euros, resulting in a total of 595 euros. Using the tax app is necessary here.
- The 95 euros in the sample calculation mean sales tax for company A, but input tax for company B.
- The input tax is therefore a claim (credit) from the tax office in your accounting. However, you have to pay sales tax yourself to the tax office for the sales you earn, these results in a liability or debt.
- The prerequisite for the input tax deduction are correctly issued invoices, which contain all mandatory information and must be issued within six months of the provision of the service, and the sales tax must be shown separately on the invoice.
Entitled to deduct input tax or not? – Things to know about input tax deduction
Input tax deduction is a good thing. Not everyone is eligible. To the tax authorities to.
Definition and example of input tax deduction
- Companies that are subject to sales tax must show sales tax on their invoices. You must also submit an advance VAT return once a month or once a quarter.
- In this advance sales tax return, you calculate how much sales tax you owe the tax office. The sales tax results from the net sales. As part of the input tax deduction, you can now deduct input tax from your sales tax.
- You owe the tax office a sales tax of 400 euros, but you can deduct 95 euros input tax, which results in an amount of 305 euros.
If you have more sales tax income in the quarter than sales taxable expenses, the amount (payment load) is positive. You have to pay the amount as sales tax. If the expenses are higher than the income, you will be reimbursed the excess as input tax. The definition of input tax is relatively simple, but its practical application is usually very complex.
If you, as a private person, want to use a photovoltaic system on your house roof to feed into the local power grid, you will have to deal with regular tax determination tasks. As an entrepreneur, you earn income that you receive from the energy supplier with sales tax in agreed cycles, so that you are required by law to submit a regular sales tax return or sales tax return to the tax office.