What is input tax? What Use it Has?

Anne E. Evans

For companies, input tax is the sales tax that they have to pay when purchasing goods and services. For this purpose, sales tax or sales tax is shown on incoming invoices from the service providers (other companies). It can thus be stated that input tax is complementary to sales tax.  […]

For companies, input tax is the sales tax that they have to pay when purchasing goods and services. For this purpose, sales tax or sales tax is shown on incoming invoices from the service providers (other companies). It can thus be stated that input tax is complementary to sales tax. 

What is the difference between input tax and sales tax? 

When input tax or sales tax is assumed only depends on the roles of the actors in a business transaction. If a company acts as a recipient of the service, sales tax is perceived as input tax. If, on the other hand, a private person or a company not subject to VAT is the recipient of the service, the tax is perceived as VAT. 

The input tax is always due when the company makes expenses. Expenditures include purchases of products from manufacturers.

The sales tax is then taken into account or is shown when a company is active for a fee – e.g. renders services – and issues an invoice for this to the recipient of the service. You can easily calculate sales tax and find perfect results there.

Who has to pay sales tax?

In principle, everyone who buys goods or services also has to pay sales tax. The sales tax is always included in the final price and was taken into account in the formation of the gross price.

Companies, self-employed, etc. must also submit their sales tax obligations in so-called sales tax advance returns monthly or quarterly (depending on the country and industry) to the responsible tax office.

VAT returns

A sales tax advance notification describes the registration of the sales tax generated by sales of a company subject to sales tax to the tax office.

You can find out more about VAT advance returns here

VAT calculator

Regardless of whether it is tax liability or possible refunds, whether pricing or general calculation – the calculation and pricing, taking into account the respective tax rates, is of course of elementary importance.

We have therefore created detailed instructions for the sales tax calculator

Overview: Tax Rates in Europe

All EU countries have their own tax rates. However, the minimum rate must be at least 15%, whereby the exact amount can be selected individually.

Sales tax in Europe 2020: definition, difference: input tax & sales tax, tax rates

Sales tax is a consumption tax that is applied to all goods and services within the EU. Anyone who is subject to sales tax also needs a sales tax identification number. You can find out more here. The average number of reduced sales tax rates is two, some countries have deviations from this, e.g. a third reduced sales tax rate that was introduced before joining the EU.

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