Anyone who collects sales tax and is entitled to input tax deducts regularly makes sales tax returns and fills out a sales tax return once a year. In the sales tax advance returns, the tax office not only asks for the sales tax collected. In the registration form, an entrepreneur also enters the amounts that he himself has paid to third parties as sales tax. He only has to pay the difference between the amounts to the tax office. But the difference can also be negative. If there were major purchases or if there were only minor sales in a quarter, the tax office may refund amounts directly.

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Input tax deduction using the example:

The self-employed programmer, achieved net sales of 25,000 euros in the fourth quarter of 2017. 19% sales tax is due on this. The programmer’s customers have paid her an additional 4,750 euros in sales tax. She has to pay this money to the tax office. But there is still the input tax deduction, because The programmer also had expenses in the course of this quarter. Among other things, she bought the router mentioned above. She also needed a new notebook for work, had telecommunications and office costs, among other things, bought a specialist book and paid for a subscription to a specialist magazine. The book and the magazine subscription are charged with 7% sales tax, she paid 19% sales tax on the other services. The programmer’s business expenses for the quarter amount to a total of EUR 7,320 gross. 

However, this includes a total of 1152 euros in sales tax. So the programmer has already paid that much sales tax. Now, in the course of the advance VAT return, this already paid VAT is offset against the received: 4,750 euros – 1,152 euros = 3,598 euros. The programmer pays 3,598 euros to the tax office for the 4th quarter of 2017 after deducting input tax. Use the sales tax calculator  for the right calculation.

Does the input tax deduction also apply to private individuals?

In principle, sales tax liability and the right to input tax deduction are inextricably linked and are mutually dependent. Therefore, only companies subject to regular tax can also be entitled to input tax deduction. Private individuals, on the other hand, are not authorized to levy sales tax and are therefore exempt from the right to input tax deduction. As with any rule, there is an exception to this. 

In which case is a private person also entitled to input tax deduction?

If a private person sells a new car in another EU country, they will be treated like an entrepreneur for tax purposes for this delivery. This means that buyers in other EU countries have to pay VAT to the tax office at their place of residence for the new car. As a result, the seller of the car can request a reimbursement from the tax office that collected his VAT payment when purchasing the new car. The tax refund is calculated from the net sales price for private sales and the tax rate that was charged when the vehicle was originally purchased.