What is input and output VAT?

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Frequently Asked Questions
What is the relationship between gross margin and business profitability?
Gross margin is closely related to business profitability, as it assesses how effectively a company generates gross profit from its sales, before subtracting operating expenses.

Is it possible to have a high gross margin and still make losses?
Yes, it is possible. A high gross margin suggests that the company is making a profit on its sales relative to its direct production costs, considering the selling price per unit.

How does amortization affect a company's gross margin?
Amortization does not directly affect the calculation of gross margin, since this indicator only considers sales revenue and direct production costs (COGS).Input and output VAT are two concepts that are closely linked to the business world and economic activities. Understanding how Value Added Tax (VAT) works is essential for businesses and self-employed workers. It is also essential to know the differences between these two types of VAT. We will cover all of this in this guide, where we will also tell you how to calculate and declare them correctly.

Content


What are the differences between input and output VAT?
How to calculate input and output VAT?
Tax obligations and declarations of input and output VAT
Conclusion
Frequently Asked Questions
What is input and output VAT?
Before going into detail about the differences between input and output VAT, it is important to define each of them.

What is input VAT?
When we talk about input VAT, we are referring to the tax paid by business owners and professionals when they purchase products or services. This VAT is applied to those goods and services that a company acquires for its correct activity.

Invoices received by the company during the procurement process list of brazil cell phone number record VAT and this can be deducted at the time of declaration. It is known as input VAT because the company assumes or supports it during the procurement process, but it is then passed on to the VAT charged to the end user.

For example, let's imagine that a self-employed baker has purchased bakery equipment worth €10,000, which carries a VAT of 21%. As part of this purchase, he would be paying €2,100 in tax, but these instruments are part of the tools necessary for the development of the activity.

This tax is known as input VAT and when declaring the VAT to the Treasury, the self-employed person can report that he or she has paid it and the deduction can be made with respect to the output VAT.

What is output VAT?
VAT charged is a much more basic and easy-to-understand concept. It is the tax that the company includes for customers when invoicing for the sale of products or services.

This tax is usually added to the final sale price and the company is obliged to declare and pay it to the Treasury, since it is not for its own benefit, but must go to the state coffers.

The name of output VAT refers to the fact that the tax is passed on to the final customer, who is the one who pays it when purchasing the product or service.