How can I correctly disclose my value added tax in the annual financial statements?
March 24, 2022 | 40,00 EUR | answered by Louis König
Dear tax consultant,
My name is Erwin Czakaj and I run a small business that generated a revenue of 100,000 euros last year. Up until now, I have always calculated and paid my sales tax myself, but now I am faced with the problem of how to correctly report it in the annual financial statements.
I have already tried to inform myself online about the topic, but the information is often confusing and contradictory. I am unsure whether I have to book the sales tax as revenue or if it should be reported separately. Furthermore, I am unsure how to correctly calculate the sales tax, as there are different tax rates and I also issue invoices to foreign countries.
My concern is that I may not create the annual financial statements correctly and therefore encounter problems with the tax office. I want to ensure that my sales tax is correctly reported and that no mistakes are made that could lead to additional payments or penalties.
Could you please explain to me how to correctly report my sales tax in the annual financial statements? Are there specific regulations or requirements that I need to consider? What documents do I need for this and how do I calculate the sales tax correctly?
Thank you in advance for your help.
Sincerely,
Erwin Czakaj
Dear Erwin Czakaj,
Thank you for your inquiry regarding the correct treatment of value-added tax in the annual financial statements of your small business. It is understandable that you may feel unsure, as the topic of value-added tax can often be complex and confusing. I will now explain in detail how you should correctly handle value-added tax in your annual financial statements.
First and foremost, it is important to understand that value-added tax is generally considered a pass-through item. This means that the value-added tax you collect from your customers must be remitted to the tax authorities. Value-added tax itself does not represent income for your company, but must simply be correctly reported and remitted.
In the annual financial statements, you should separate value-added tax from your revenues. Therefore, you should not record value-added tax as revenue, but rather separate it under the heading "Value-Added Tax" or "Value-Added Tax Refunds." This makes it clear that it is a tax that simply flows through your company.
To calculate value-added tax correctly, you must consider the different tax rates. In Germany, there is a standard rate of 19% and a reduced rate of 7%. For invoices issued abroad, there are different regulations, depending on whether they are intra-community supplies or exports.
To calculate value-added tax, you will need all your invoices, both from national and international customers. You must multiply the net amounts of your invoices by the respective tax rate to calculate the amount of value-added tax.
It is advisable to seek assistance from a professional tax advisor to ensure that value-added tax is correctly calculated and reported. A tax advisor can also help you to consider any special regulations or exemptions that may apply to your business.
In conclusion, it is important to correctly report value-added tax in the annual financial statements to avoid problems with the tax authorities. Proper bookkeeping and remittance of value-added tax are essential to avoid repayments or penalties.
I hope that my explanations have been helpful to you and have reduced your uncertainty regarding value-added tax in the annual financial statements. If you have any further questions, I am happy to assist you.
Best regards,
Louis König
