National VAT advice
If you perform economic activities independently, either as an individual, an entity or in the form of a partnership, and you are remunerated for these activities, you qualify as an entrepreneur for VAT purposes. In that case, you are in principle obliged to charge VAT to your customers on these remunerations. Additionally, various administrative obligations apply, such as periodically filing a VAT return and maintaining a VAT administration. Would you like to know more about your VAT position, and your rights and obligations as a VAT taxable person? Feel free to contact us for an informal conversation.
VAT laws and regulations are complicated and if you do not comply with them meticulously in your role as a VAT taxable person, fines and/or retrospective charges are not inconceivable. At the same time, VAT can offer opportunities, if you are aware of your rights as company and use them accordingly.
VAT legislation has several VAT exemptions for specific sectors and business activities. If you supply goods or services which are covered by an exemption, you do not charge VAT to your customers. The downside for you, in your role as supplier, is that you cannot reclaim any corresponding input VAT charged to you. The VAT on costs attributable to a VAT exempt and/or non-economic activity, is not refundable and therefore increases costs. In such cases, VAT is an expense.
The right to deduct input VAT
If you are a VAT taxable person, you can deduct input VAT charged to you by third parties. However, several conditions apply to this so-called right to deduct input VAT. For example, you must have an invoice which meets the legal requirements. Furthermore, you must, as a matter of fact, be the customer of the supply on which VAT was levied. Also, the right to deduct input VAT in principle only applies to costs incurred for activities that are subject to VAT.
Therefore whether or not you, as VAT taxable person, can deduct VAT charged to you by your suppliers, depends on the circumstances and the activities performed. If you would like to know more about deducting input VAT and the corresponding legal requirements, please do not hesitate to contact us.