The recovery of VAT found on invoices depends on a number of substantive and formal conditions. The three main conditions for deducting VAT are due at the supplier, the allocation of goods and services to taxable transactions, which are themselves taxable, and obtaining an invoice that complies with the formal rules.
VAT is a very specific indirect tax
Neutral for businesses, it is the sole responsibility of the end consumer or the non-taxable person. The partial taxpayer, the one who does not recover all the deductible VAT is partially assimilated to a non-taxable person.
The taxable person is a tax collector. He pays back the tax collected from his customers, after deducting the one he has already paid to his suppliers. We then speak of deductibility of VAT or recoverable VAT.
VAT is deductible under certain substantive and formal conditions. Only a few exceptions remain, such as the VAT on gasoline, that on plane or train tickets or that on passenger vehicles (and not commercial vehicles) for example. These are exclusions from the right to deduct. Make use of the business calculator there.
VAT is deductible at the customer when it is payable at the supplier
A company receives the goods purchased from its main supplier for resale. It also receives an invoice from its accountant, which does not bear the mention "VAT on debits". On most invoices, the VAT rate is the normal rate, calculated from the price excluding VAT.
These are operations giving rise to the right to deduct. They allow him to immediately deduct the tax that will be paid in payment for the goods. For the accountant's fee bill, she will have to wait until she has paid her debt. Only an option for debits could have made the tax payable immediately to the accountant, the service provider.
· Because the opening of the right to deduct at the customer, is conditioned by the chargeability of the VAT at the supplier. As soon as the supplier has the obligation to remit the tax to the State, the customer can deduct it.
The method of payment only affects the provision of services. In the absence of an option for debits, any total or partial payment, down payment, makes VAT payable. VAT will be calculated on the amount of the payment, considered inclusive of all taxes or including all taxes.
The goods that the company buys must be assigned to taxable operations, ie, themselves subject to VAT when they are sold. This direct link between expenditure subject to value added tax and downstream operations does not necessarily concern a particular operation. It is enough that there is a link with the whole of the activity of the company.The link with the operating cycle of the company's goods and services must be direct and immediate. The expenses are necessarily made in the interest of the company.
Conclusion
The company takes part of the goods purchased for the personal needs of its managers. The tax will not be fully deductible.Likewise, the value added tax invoiced by a lawyer for fees relating to the manager of an LLC will not be deductible. This is the case when these costs must avoid conviction of the manager as a natural person.
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