What are the effects of the VAT (value added tax) group liability?
January 6, 2023 | 40,00 EUR | answered by Lina Sauer
Dear tax consultant,
My name is Xenia Weise and I am the managing director of a medium-sized company in the textile industry. In recent years, we have established several subsidiary companies to expand our business and explore new markets. In doing so, we have come across the concept of VAT group and I am wondering what implications this could have for our company.
The current situation is as follows: We have a total of five subsidiary companies, each operating independently but under our control. As the parent company, we provide management services to the subsidiary companies and coordinate business activities. So far, we have paid and accounted for VAT for each company separately.
My concerns mainly revolve around the tax implications of the VAT group. I am wondering if consolidating the turnover of all companies under the parent company could increase or decrease the VAT burden. Additionally, I am unsure about how input tax deduction eligibility is regulated in a VAT group and whether this could potentially result in tax benefits.
My question to you as an experienced tax consultant is therefore: What are the implications of the VAT group for our company? Are there tax benefits that we can take advantage of, or should we stick to the current VAT accounting method? I am looking forward to your assessment and potential solutions.
Thank you in advance for your help.
Best regards,
Xenia Weise
Dear Ms. Weise,
Thank you for your inquiry regarding the VAT consolidation for your company in the textile industry. As a tax advisor with many years of experience in the field of VAT, I am pleased to be able to assist you with your questions.
VAT consolidation is a special form of corporate connection, where a parent company and its subsidiaries are taxably combined into one entity. This has particular implications on VAT liability and input VAT deduction.
Through consolidation, the sales of the subsidiaries are included in the VAT calculation of the parent company. This means that the VAT for all companies is paid and accounted for together. In some cases, this may lead to a reduction in VAT liability, as the sales of the individual companies are combined and potentially subject to more favorable tax rates.
Additionally, as the parent company, you benefit from an extended input VAT deduction. This means that you can claim input VAT from invoices not only for your own services, but also for the services of your subsidiaries. This can result in tax advantages, as you can deduct a higher amount of input VAT and thus reduce your VAT liability.
Overall, VAT consolidation can indeed bring tax benefits to your company, especially in terms of VAT liability and input VAT deduction. It is important to carefully examine the individual situation of your company and calculate whether consolidation would be worthwhile in your case.
I recommend conducting a detailed tax analysis and seeking tax advice if necessary to understand the implications of VAT consolidation for your company. I am happy to assist you with any further questions and support you in implementing consolidation if it would be beneficial for your company.
I hope that this information has been helpful to you and I am available for any further inquiries.
Best regards,
Lina Sauer
