November 30, 2020

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The Business Ordered

The Ultimate Options in Taxation Details for You Choices

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Ultimately, however, the economically burdened one is the end consumer, who has to pay 38 euros sales tax at the net price of 200 euros.

It is noticeable that every entrepreneur in the value chain has to pay the tax for his added value to the tax office. The manufacturer has made the table 100 euros more expensive and has to pay 19 euros VAT and you have made the table another 100 euros more expensive and also have to pay 19 euros VAT to the tax office. Since only value added is taxed at each stage of value creation, the sales tax system is called value added tax.

Exemption from VAT

Since the VAT system is a very large administrative burden for entrepreneurs and regular VAT returns have to be submitted, there is a relief provision for small entrepreneurs.

This regulation is known as the small business regulation and enables the entrepreneur to forego the complicated calculation of VAT. Use the sales tax calculator in this case.

You can find more information about this in the article on the small business regulation

Value-added tax, also known as sales tax, is an important source of income for most countries around the world. In Germany it is 19 and 7 percent and affects almost all consumers spending. As a so-called indirect tax, it is levied by companies, but ultimately passed on by them to consumers. In the context of the reimbursement of sales tax to companies, input tax deduction is mentioned. This comes into play, for example, when a company pays its suppliers gross prices. This is to prevent the sales tax costs from increasing with every company involved in the value creation. Companies carry sales tax on a regular basis advance sales tax returns to the responsible tax office.

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How VAT works

Value added tax was introduced in the 20th century. It is raised from all who sell services or goods. However, since these pass the tax on to the consumer, the final consumer bears the cost of the tax. In Germany, the VAT rate for most goods and services is 19 percent. In some cases, the reduced rate of seven percent applies. For example, if a company pays VAT for goods from a supplier, it can have this reimbursed by the tax office. The price for the actual product remains unaffected by how many batches are involved in its creation.

Example: 

If a fashion retailer buys trousers for 51 euros including VAT, he has VAT expenses of 9.70 euros. If he sells the trousers for 85 euros, he receives 16.20 euros in VAT. That means he owes the tax office 6.50 euros. However, in such a case there are usually other costs that are eligible for input tax deduction, which are included in the invoice. In contrast to the seller, the private final buyer of the trousers does not have the option of claiming VAT.

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