Requirements to be able to deduct deductible
Posted: Mon Jan 20, 2025 5:14 am
Difference between deductible VAT, input VAT and output VAT.
When a customer buys a product or service from your company, the invoice must reflect the VAT bill that the person is paying. This money is collected by the company and then has to be declared to the Treasury. This is known as output VAT.
On the other hand, when you make a purchase of a good or service for your business, you will have to pay VAT. However, if said good will be used as part of your business activity, then the tax can be deducted from the declaration and is known as input VAT .
Deductible VAT is the VAT incurred that can be subtracted from the VAT charged (the VAT that the company charges its customers) in the tax return. For the VAT incurred to be deductible, it must meet certain requirements, such as being directly related to the business activity and having the appropriate documentation. Special care must be taken not to deduct VAT on expenses that are not strictly linked to the company's activity, such as personal expenses disguised as business expenses.
In short, all deductible VAT is input, but not all input VAT can be deducted. Only VAT that meets the conditions established by law is deductible.
Difference between deductible VAT and deductible accrued VAT
It is also important to make a distinction between deductible VAT and deductible accrued VAT. As their names indicate, both can be deducted from the tax return.
The difference lies in the period of time over which the VAT collection is applied. When we talk about deductible accrued VAT, we are referring to the tax that is generally generated every quarter and that can be directly deducted in that same period of time.
VAT
Article 93 of Law 37/1992 establishes the minimum list of canada cell phone number requirements that companies must meet to qualify for VAT deduction.
It establishes as a fundamental condition that companies, self-employed persons or professionals must be carrying out their economic activity on a regular basis. Only in this way can the purchases made be supported and have the right to the deduction.
Other fundamental requirements that you have to know are:
VAT on expenses incurred must be related to the company's economic activity. This includes the purchase of new machinery, raw materials and basic supplies, among others.
It is necessary to keep all documentation proving the purchase of goods or services. Therefore, documents such as invoices or any proof of transactions carried out showing the collection of VAT according to the type of expenses must be stored.
The company, self-employed person or professional must carry out activities that allow VAT to be deducted, such as the sale of goods or services subject to VAT.
Any purchased goods must be recorded in the company's accounting books as well as in the VAT book. This is a fundamental step in proving the use of the goods within the business's operations.
The right to deduction can only be exercised if no more than 4 years have passed since the purchase.
It is extremely important that you know the applicable regulations for deductible VAT, since this will allow you to obtain this tax benefit and also avoid penalties. It is best to seek a tax advisor who can help you identify the transactions in which the deduction applies and comply with the requirements that we have shown you above.
When a customer buys a product or service from your company, the invoice must reflect the VAT bill that the person is paying. This money is collected by the company and then has to be declared to the Treasury. This is known as output VAT.
On the other hand, when you make a purchase of a good or service for your business, you will have to pay VAT. However, if said good will be used as part of your business activity, then the tax can be deducted from the declaration and is known as input VAT .
Deductible VAT is the VAT incurred that can be subtracted from the VAT charged (the VAT that the company charges its customers) in the tax return. For the VAT incurred to be deductible, it must meet certain requirements, such as being directly related to the business activity and having the appropriate documentation. Special care must be taken not to deduct VAT on expenses that are not strictly linked to the company's activity, such as personal expenses disguised as business expenses.
In short, all deductible VAT is input, but not all input VAT can be deducted. Only VAT that meets the conditions established by law is deductible.
Difference between deductible VAT and deductible accrued VAT
It is also important to make a distinction between deductible VAT and deductible accrued VAT. As their names indicate, both can be deducted from the tax return.
The difference lies in the period of time over which the VAT collection is applied. When we talk about deductible accrued VAT, we are referring to the tax that is generally generated every quarter and that can be directly deducted in that same period of time.
VAT
Article 93 of Law 37/1992 establishes the minimum list of canada cell phone number requirements that companies must meet to qualify for VAT deduction.
It establishes as a fundamental condition that companies, self-employed persons or professionals must be carrying out their economic activity on a regular basis. Only in this way can the purchases made be supported and have the right to the deduction.
Other fundamental requirements that you have to know are:
VAT on expenses incurred must be related to the company's economic activity. This includes the purchase of new machinery, raw materials and basic supplies, among others.
It is necessary to keep all documentation proving the purchase of goods or services. Therefore, documents such as invoices or any proof of transactions carried out showing the collection of VAT according to the type of expenses must be stored.
The company, self-employed person or professional must carry out activities that allow VAT to be deducted, such as the sale of goods or services subject to VAT.
Any purchased goods must be recorded in the company's accounting books as well as in the VAT book. This is a fundamental step in proving the use of the goods within the business's operations.
The right to deduction can only be exercised if no more than 4 years have passed since the purchase.
It is extremely important that you know the applicable regulations for deductible VAT, since this will allow you to obtain this tax benefit and also avoid penalties. It is best to seek a tax advisor who can help you identify the transactions in which the deduction applies and comply with the requirements that we have shown you above.