How is the deduction of input tax calculated in cross-border transactions?
July 7, 2023 | 30,00 EUR | answered by Phillip Buchner
Dear tax consultant,
I have recently been conducting more and more cross-border transactions and I am unsure about how to properly account for input tax. I have heard that there are some specific considerations to keep in mind and I want to make sure that I am accurately accounting for everything to avoid any issues with the tax authorities.
Currently, I am operating as an entrepreneur in Germany and regularly purchase goods from an EU country. This naturally entails input tax amounts that I would like to deduct correctly. I am wondering how exactly the accounting of input tax in cross-border transactions works and if there are any special regulations to be aware of.
My concern is that I may make errors in the accounting process, leading to potential additional payments or other consequences from the tax authorities. Therefore, it would be very helpful for me if you could explain how to correctly account for input tax in cross-border transactions and what steps need to be taken into consideration.
Could you provide me with possible solutions or tips on how to optimize the accounting of input tax in cross-border transactions to avoid any tax-related issues? I look forward to your professional advice and thank you in advance for your support.
Best regards,
Emma Kuhn
Dear Mrs. Kuhn,
Thank you for your inquiry regarding the deduction of input tax in cross-border transactions. It is understandable that you feel uncertain and want to ensure that you are deducting everything correctly to avoid any issues with the tax authorities. I will now explain in detail how the deduction of input tax in cross-border transactions works and what steps you should take.
In principle, you can deduct the input tax from purchases made in the course of your business activities. This also applies to purchases from other EU countries. However, there are some specific considerations to keep in mind when dealing with cross-border transactions. First and foremost, you must ensure that the supplier from the EU country has a valid VAT identification number. This number should be indicated on the invoice.
If you import goods from another EU country and wish to deduct the input tax for this, you must submit a Recapitulative Statement in addition to the supplier's invoice. This statement is used to report the VAT for intra-Community supplies of goods and services. It is important to submit this statement to the tax authorities on time to avoid tax issues.
Furthermore, you should ensure that the invoices contain all the necessary details, especially the VAT identification number of the supplier, your own name, and your own VAT identification number. Only if all details are correct, can you deduct the input tax.
To optimize the deduction of input tax in cross-border transactions and avoid errors, I recommend keeping accurate records and carefully reviewing all documents. If you are unsure if you have deducted everything correctly, you can always seek assistance from a tax advisor who can help with questions regarding input tax deduction.
I hope that this information has been helpful to you and I am available to answer any further questions you may have. Thank you for your trust and I wish you continued success with your cross-border transactions.
Sincerely,
Phillip Buchner
