The VAT supported is the cost added to the net price assumed by an individual or consumer when buying a particular good or product or enjoying a service. That is to say, it is the consumption tax that we pay in our purchases or consumptions and that the companies or freelancers that offer their goods or services assume as VAT charged or accrued .
The main issue to consider when talking about VAT supported is whether or not this is deductible. This is because the tax laws of countries often only allow companies or self- employed workers to deduct or benefit from tax advantages in products related to their business activity.
That is, in order to deduct supported VAT, one must belong to a business project through a company or in a sole proprietorship and carry out an economic activity . We would talk about a fairly strict fiscal regulation in that regard, avoiding that companies can benefit from deducting purchases not related to their business profile and their activity or directly belonging to their personal sphere.
Tax regulations qualify as deductible expenses the corresponding purchases of goods or services whose mission is to participate in business activity , for example when we talk about the purchase of merchandise, payments of independent professional services such as electricians or advisors, or bills paid for electrical supplies or telephony In the case of travel or expenses of diets, these must follow this same criterion and be justifiable as typical of the activity normally developed by the company.
It is worth mentioning the example of investment assets, which are usually considered partially deductible even though they do not have purely business employment. On the other hand, it is necessary that the autonomous individuals or companies that want to deduct their supported VAT have the corresponding supporting documents and invoices for the quarterly or annual tax return.
Example of supported VAT
An example of non-deductible supported VAT is the amount of tax we pay for the purchase of a 200 euro wrist watch. Of that amount, 21% (that is, 42 euros according to the tax rates in Spain ) will be the VAT that we are assuming within the payment and that the store that markets it will have to consider as passed VAT.
Regarding the VAT deductible we can put the case of the VAT we pay inside the electricity bill of the commercial premises or the office of our company. If the electricity bill we pay in a month is 200 euros, then 42 euros (also 21%) will be those that the company can deduct in the presentation of VAT.
At the end of each tax period, usually quarterly or annually, the companies calculate the VAT that they must declare or pay to the Tax Agency establishing a difference between the VAT charged and the VAT supported. (VAT to be paid = VAT Recovered – VAT Supported).