This article was first published on Medium on January 24, 2019.
VAT (or value added tax) is the indirect tax included in the selling price of goods and services. If companies collect it on behalf of the State, it is not a charge and there is no need to mention it on your profit and loss accounts. 🤑
That is why, when it is time to report your VAT, you must first understand the difference between output, deductible and paid VAT... The declaration and payment of VAT to the State depend essentially on the regime you have chosen.
- The difference between the amount excluding tax and the amount including all taxes (i.e., output VAT collected) is equal to the amount that the company invoices the customer on behalf of the State.
- Deductible VAT is the VAT that the company pays to its suppliers when an invoice is paid. But why is it deductible? Well, in addition to collecting VAT on behalf of the State by invoicing its customers, the company must also pay an amount of VAT on each of its expenses. The company may, under certain conditions and by justifying its payments, deduct the tax paid from the VAT collected.
- Paid VAT is the difference between output VAT collected and deductible VAT. When the deductible VAT is higher than the output VAT collected, the company receives a VAT credit and can declare it on its balance sheet.
Do you need an invoice? 🗒
Only receipts and invoices containing information on the VAT rate(s) applied will allow you to calculate the paid VAT: by deducting the paid VAT from the VAT collected on behalf of the State.
While invoices and receipts should normally include the name of the company to ensure that deductible VAT is recovered, certain receipts such as restaurant invoices or parking tickets are exceptions.
You’ll understand, the receipts of your employees' expenses will no more end up in a ball at the bottom of a back pocket. Especially since you are required to keep the original versions of these documents in case of a tax audit.
That’s where Qonto comes in! 🤘🏻
Let's face it, doing your accounting and VAT balance sheet is not a pleasure. This is even less the case if it means having to chase after all the attachments for your employees' expenses.
With Qonto, payment is made in real time. Your employees are notified instantly and only must access their mobile application to complete their transactions with a receipt and the (deductible 😜) VAT applied.
How does it work?
Companies that have subscribed to a Solo or Standard plan give their employees the possibility to select the VAT rate and amount indicated on the transaction receipt. Those with a Premium plan can benefit from automatic VAT detection. When the employee adds the receipt, the Qonto algorithm 🤖 identifies the VAT rate applied and presto! Just confirm it and it will appear on your accounting export.
For the entire team, entering VAT when adding the payment receipt is a major time saving!