Comment by butterknife
8 days ago
My company pays VAT surplus to government every quarter since the VAT we collect on our products and services is higher then the VAT we pay for our purchases. How are we not paying it?
8 days ago
My company pays VAT surplus to government every quarter since the VAT we collect on our products and services is higher then the VAT we pay for our purchases. How are we not paying it?
"Paying" is a bit too ambiguous term. Let's say we go to have a lunch, but I forgot my wallet at the office. You pay my lunch and once we are back at the office, I pay you back. Who paid my lunch, you or me? Your company pays VAT in the technical sense you paid my lunch and your company does not pay VAT in the economical sense I paid my lunch.
You are answering your own question: companies collect VAT from consumers and pass it on to tax authorities.
Then, as the company is VAT-registered what it purchases is either VAT-free or VAT paid can be deducted from the amount of VAT collected from consumers (as you said).
Bottom line: companies do not pay VAT on their own purchases, they only pass on VAT collected from consumers.
Obviously companies do make actual payments to the tax authorities but the point is that these are not from their own funds, they only effectively act as tax collectors.
You are right I suppose. We pay it and then we can get some of it returned.
You get all of it returned. 100% of the VAT you paid on things you as a company bought you'll get back from the tax office.
And when selling products, you'll send 100% of the VAT collected from consumers to the tax office.
VAT doesn't affect a company (besides the bookkeeping).
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