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Comment by mytailorisrich

16 days ago

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.

4 comments

mytailorisrich

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butterknife  16 days ago

You are right I suppose. We pay it and then we can get some of it returned.

  • bildung  16 days ago

    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).