The difference between input tax and sales tax
The input tax reduces your sales tax burden to the extent that you can deduct the relevant amounts – if you are entitled to do so – from your sales tax to be paid. This process is also called input tax deduction. You pay the amount of input tax when you settle your invoices to your suppliers. These in turn are obliged to book the sums as sales tax.
In simple terms: as a selling or performing entrepreneur, you come into contact with sales tax. If you buy from one company, you pay input tax (which in turn represents sales tax for the other company).
This is how you calculate the input tax
According to SPORTINGOLOGY.COM, the calculation of input tax does not differ from the calculation of sales tax. Here, too, the corresponding net amount forms the basis. Depending on whether the service or the goods are taxed at 19% or 7%, this results in a different amount.
Example of calculating sales tax and sales tax payable
In order to calculate your sales tax or your sales tax payable load, it is advisable to use a practical sales tax calculator. This is especially true if you set up your invoices – the classic way – in Word and have to enter the individual items manually.
But what is the sales tax burden at the end of a quarter or at the end of a month? Even if accounting software such as sevDesk usually presents you with the finished result after you have entered all the data, it of course makes sense as an entrepreneur to deal with this exciting topic.
Put simply: in order to determine your sales tax payload, it is important to compare expenses and income .
To do this, add up all the net sales prices for a month or quarter in order to determine the applicable sales tax. Or to put it another way: how much is the amount that your customers have paid in sales tax in the relevant assessment period?
In contrast, you now set the purchase prices. Or to put it another way: how much input tax did you pay your customers?
Now you can easily compare sales tax and input tax. This results in exactly two options:
1. You paid more sales tax than input tax.
2. You paid more input tax than sales tax.
In the first case, the relevant amount must be reported to the tax office and paid as part of an advance payment within the shortest possible time. If case 2 occurs, you will of course also report the corresponding values to the tax office, but you will receive a reimbursement.
Posting records for correct posting of sales tax
Since the sales tax is a so-called “transitory item” and you owe this money to the tax office in the first step (and not yet taking the input tax into account), the corresponding amount must of course also be booked separately.
This becomes clear from the classic booking rates.
For example, if you have issued your customer an invoice for EUR 10,000 net and taxed at 19% sales tax, this results in a total of EUR 11,900 .
This process is booked as follows:
“Receivables from deliveries and services 11,900 euros to sales 10,000 euros
VAT 19% 1,900 euros”
The amount that is posted to the “Sales revenue” account is money that will flow directly into your company. As mentioned, sales tax is continuous and therefore does not count towards your profit or sales.
Standard tax rate of 19%
The list of products and services that are taxed at 19% VAT is long. This is why the so-called “standard tax rate” is often used in this context. Among other things, this includes …:
- Different food items
- Mineral water
In the course of time, however, it was precisely this standard tax rate that kept causing discussions. Because: the “basic rule” is that luxury items in particular should be affected by the increased tax rate. A look at the list, including the fact that hygiene articles, such as sanitary towels and tampons, fall into the 19% category, shows, however, that this may still be reworked in the future.
Reduced sales tax of 7%
Among other things, to make “important products” more affordable, many everyday items are offered on the basis of a sales tax of 7%. Classic examples …:
- Different types of fruit (for example apples and pears)
- Vegetables like tomatoes and cucumbers
- Books and magazines
- Cinema tickets (and other cultural offers)
- Tap water.
Who gets a VAT ID?
In general, every entrepreneur can apply for a VAT ID , but all legal entities that are not entrepreneurs also get an ID. The sales tax ID is used to ensure that a person liable for sales tax also has a unique identifier. The ID is only used if there is a settlement within the European single market and a tax office.
How do I get the identification number?
In the beginning, the VAT ID could only be applied for in writing from the responsible tax office, but in the meantime it is of course possible to apply for it online. Only important information, such as the full name of the person and address, should be included in an application.
Companies must provide additional data, including the tax number , the exact name of the company, the full address and the address of the responsible tax office. The holder of an ID number is entitled to deliver his goods to other EU member states and the whole thing is tax-free.