To get right to the point: VAT charged on your purchases that you cannot recover – because you are exempted from VAT – is certainly not lost on your accounts!
Do I actually have to pay that vAT charged?
Absolutely! Because your supplier will not take your vAT type of VAT into account at all. So for your supplier, it makes no difference at all whether you are subject to VAT or exempted from VAT, he will charge VAT as he always does.
Let’s clarify with a calculation example:
The supplier Shoplokaal charges you 100 euros excluding VAT for the sale of some trade goods and, as always, it adds 21% VAT. So you end up with an invoice in your mailbox of 121 euros including VAT, i.e. 100 euros excluding VAT and 21 euros in recharged VAT.
You are subject to VAT
Let us briefly explain the situation as if you were a business subject to VAT. Then you pay 121 euros to the supplier Shoplokaal, 100 euros excluding and 21 euros in VAT, but via your own vAT declaration you can recover this 21 euros of paid VAT. The VAT administration, via your submitted vAT declaration, will charge that 21 euros of VAT you paid to suppliers Shoplokaal: either you will get this 21 euros refunded or it will be offset against VAT payable.
Conclusion: the final cost of this purchase is 100 euros, i.e. the amount excluding VAT. The paid VAT will be offset via the vAT declaration.
You are exempted from VAT
Identical situation, but for a VAT exempted entrepreneur. Here you pay 121 euros to supplier Shoplokaal, but you do not file a vAT declaration and consequently you cannot recover the VAT paid via such a vAT declaration. Thus, the final cost for your accounts in this scenario is 121 euros, simply the amount you paid to your supplier.
So, as the above example shows: the VAT you paid to your supplier as an exempted from VAT still has a place in your accounts. You simply take the total invoice amount (including VAT) as an expense for your accounts.
So as an exempted from VAT, my purchases are ‘more expensive’?
Yes, but every disadvantage has its advantage!
As an exempted from VAT, you can’t recover VAT, but you also don’t have to pass on VAT to your customers. That can be an important part of your pricing strategy!
You are subject to VAT
Same situation as above: you have in fact purchased some trade goods worth 100 euros excluding VAT on which 21 euros VAT has been charged. Via the vAT declaration, you recovered that 21 euros vAT, so the final cost of your purchase was only 100 euros.
You then sold those trade goods to a private person for 300 euros excluding VAT to which you had to add 21% VAT, being 63 euros. So your private person customer had to pay a total of 363 euros.
Conclusion: you received 300 euros exclusive of VAT from your private person customer (because you had to pass on that 63 euros vAT received from your customer to the VAT administration). In addition, you made purchases of 100 euros excluding VAT (because you can recover that 21 euros of VAT via your vAT declaration).
So your private person customer has paid 363 euros, with you, the entrepreneur, making a profit of 200 euros.
You are exempted from VAT
Same situation as above: you actually bought some trade goods worth 121 euros including vAT. You cannot recover VAT as exempted from VAT, so the final cost of your purchase was 121 euros.
You then sold those trade goods to a private person for 350 euros (slightly more expensive than the example above), but you are exempted from VAT and the final invoice total for your private person customer was 350 euros with 0% VAT.
Conclusion: you received 350 euros from your private person customer, where you had to charge 0% vAT %. In addition, your cost of trade goods was 121 euros.
So you have 229 euros of profit, a higher amount of profit than your vAT amount subject to VAT. Simply because you played with the selling price. On the other hand, you were still cheaper for your private person customer, at least as interesting!
My customers are mainly companies? 🏭
If you were then to apply the above calculation example, you would no longer be cheaper as an exempted from VAT!
Because once your customer himself is a company subject to VAT, it doesn’t matter to them at all whether you pass on 21% or 0% VAT. Your VAT subject to VAT customer will recover this VAT through their own vAT declaration anyway, so that no longer makes a difference.
Dexxter to the rescue 🙌
Definitely! Because with Dexxer, we are maximally committed to keeping your own accounts, regardless of your statute.
Do you choose to be exempted from VAT? Then your Dexxter account will be 100% VAT-exempt, so you won’t make any mistakes when entering expenses or preparing sales invoices.
Do you still want to switch to a VAT subject statute? One convenient click and your Dexxter account is ready to continue as an entrepreneur subject to VAT. Purchases, sales, filing your own vAT declarations, customer lists… Your accounts from A to Z with lots of info icons and our handy videos to guide you through your accounts.
