As a general rule, all sales of products and services are subject to VAT. That is to say all the commercial transactions that you carry out (each time you invoice for goods, products or services). These operations are taxable if they are part of an economic activity and are carried out in exchange for the payment of a consideration, this is the price.
The VAT is levied on each operation:
- Purchase (VAT to be reimbursed, known as “deductible VAT”),
- sales (VAT to be deducted from the buyer and to be paid to the Public Treasury, known as “collected VAT”).
- The payment of VAT to the Public Treasury is made by the difference between the VAT collected and the deductible VAT. Only the balance is to be paid or to be reimbursed by the Public Treasury.
What are the cases of VAT exemption?
Some operations escape VAT, these are the activities:
- of exports and intra-Community deliveries,
- sea fishing,
- non-profit works (of a social nature),
- paramedical and medical,
- rental of bare buildings or furnished accommodation,
- deliveries of new industrial waste and recovered materials.
What are the different VAT rates?
The VAT is always calculated on the price excluding tax
There are several VAT rates:
Standard rate: 20%, which concerns the majority of sales of goods and services.
Intermediate rate: 10%, which concerns some agricultural products, catering, passenger transport, most shows, publishing and certain work carried out in the main dwelling?
Reduced rate: 5.5%, which concerns food products, gas and electricity subscriptions, energy supply networks and equipment and services for disabled people?
Special rate: 2.1%, which concerns drugs reimbursable by Social Security, sales of live animals for slaughter and delicatessen, the television license, some shows, some press publications registered with the Joint Committee for Publications and Agencies Press.
How to recover the VAT paid?
The VAT that you yourself have paid during professional purchases (from your suppliers for example) is called deductible VAT.It is recoverable, by imputation, on the VAT that you have collected from your customers on your sales made, or by request for reimbursement from the Public Treasury. Make use of the c corp tax calculator for the best results there.
For this, you must respect certain conditions:
- Your deductible VAT must be justified (business expenses), and you must be in possession of an invoice showing the VAT paid,
- You cannot deduct this VAT before a certain date, i.e. the VAT paid cannot be recovered in the same month as the purchase concerned,
- The goods and services purchased must be useful for your business operations.
- However, if your deductible VAT is greater than your collected VAT, the excess constitutes a VAT credit.
You then have the choice:
- To charge this credit to your next declarations,
- To obtain the refund, if the imputation is impossible,
To charge on a future due date to pay another professional tax due to the same accounting network of the Directorate General of Taxes.