Deduction of VAT on business purchases

To be able to deduct VAT, following conditions must be complied with:

• The company must be subject to a actual VAT system (simplified real or normal real). It must not be exempt from VAT or be in exemption from VAT.
• The VAT to be deducted must relate to purchases of goods or services necessary for the operation of the company. If the purchase is made for the personal use of the manager, then the VAT applied to the purchase cannot be refunded.
• The company must be able to justify purchases on which it claims a deduction of VAT. It must also be possible to read the amount of VAT which it has paid and for which it seeks reimbursement. The voucher will usually be an invoice, but may be another document (e.g. purchase order).

We must be very careful about administrative formalities, particularly the rules concerning invoicing (mandatory information, retention periods, etc.). In the case of checks, the authorities may request reimbursement of the VAT deducted if the supporting invoices are not in conformity.

VAT may be deducted only from the moment it becomes due. Indeed, the concept of chargeability is important because it determines the period during which you will have to declare VAT and at the same time deduct it.

Depending on the type of sale, VAT is not payable at the same time:

• Sale of goods : VAT is payable at the time of delivery (usually in relation to the date of the invoice). When an advance payment is made, VAT becomes deductible as soon as the advance payment is made.
• Sale of services : VAT is chargeable at the time of receipt of the price. However, the company may opt for the debit regime. In this case, the VAT is due on the date of the invoice.

To learn more about VAT chargeability, you can consult the relevant sheet.

The company must deduct the VAT at the time of VAT return. It must indicate the sales or purchase transactions it has carried out and the VAT deductible on the corresponding lines.

When the deductible VAT is higher than the tax collected, it is said that the company has a VAT credit. In other words, the tax authorities owe him VAT.

The company has 2 options:

• It may decide to postpone this tax credit on subsequent tax periods, i.e. the remaining deductible VAT will be used to reduce the VAT collected in the following month.
• She can claim refund all or part of its VAT credit.

Some goods or services have specific deductibility rules.

In order to obtain a VAT refund, the company must apply to the company Tax Office (SIE) on which it depends at the time of its VAT return on which the VAT credit is highlighted. In other words, it is the return on which the VAT collected is less than the deductible VAT.

Online tax account for professionals (EFI mode)

Reimbursement may be annual, half-yearly, quarterly or monthly. Moreover, according to the company's VAT system, the VAT refund arrangements are not the same.

Although VAT on business purchases is in principle deductible, certain purchases of goods or services are excluded.

Examples include:

• Goods or services relating to accommodation provided free of charge to the company's managers and staff. This does not apply to guarding, security or surveillance personnel housed on construction sites or on the premises of the company.
• Gifts not exceeding €73 VAT per object per year for the same beneficiary (to customers, suppliers or staff)
• Goods or services used in more than 90% for purposes outside the company (for example, a contractor buys software that they use at more than 90% for personal needs)
• Vehicles designed for the transport of persons or for mixed use (professional and personal use) and belonging to the company. This does not apply to passenger transport companies, car rental companies subject to VAT and driving schools.