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Ask a tax advisor on the topic of Input tax

How does input tax affect the liquidity of my company?

Dear tax consultant,

I run a small business and am currently faced with the question of how the input tax affects the liquidity of my company. So far, I have never paid much attention to what the input tax means for my company, but as I have been experiencing liquidity problems lately, I would like to delve into it now.

Currently, I regularly have to pay sales tax to the tax office and at the same time can claim input tax from purchases in my company. I am now wondering how these two items affect the liquidity of my company. Is it possible that through the input tax, I have more money available to cover my ongoing costs? Or is it also possible that I have paid too much input tax, which could impair my liquidity?

I am concerned that I may not be able to effectively use the input tax to improve my liquidity, and I would like to know how I can optimize this. Are there perhaps ways to better utilize the input tax to secure my liquidity and improve my financial situation?

Thank you in advance for your support and I look forward to your response.

Best regards,
Emma Vollmann

Phillip Buchner

Dear Mrs. Vollmann,

Thank you for your question regarding input tax and its impact on the liquidity of your company. It is very important to address this issue in order to optimize your financial situation and avoid potential liquidity issues.

Input tax is the sales tax that you pay on your business purchases. You can then claim this input tax as a deduction when you have to remit sales tax to the tax office. This means that you can deduct the input tax from the sales tax and only pay the difference to the tax office. This regulation can actually improve your liquidity, as you will have to remit less sales tax to the tax office.

However, it is important to note that you cannot claim input tax indefinitely. It is possible that you have paid too much input tax and therefore receive a refund from the tax office. In this case, your liquidity may be temporarily affected as you wait for the refund. It is therefore advisable to regularly review and adjust your input tax to ensure an optimal liquidity situation.

To make better use of input tax and secure your liquidity, there are various options. For example, you could strategically plan your purchases in order to claim the highest possible input tax amounts. You could also consider whether it makes sense to make investments to increase the input tax and thus improve your liquidity.

It is advisable to seek advice from an experienced tax advisor in order to optimize the use of input tax and improve your financial situation. I am happy to assist you with further questions and provide individual advice.

I hope this information is helpful to you and wish you success in optimizing your liquidity.

Best regards,
Phillip Buchner

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