How does the difference taxation affect my value added tax (VAT)?
June 15, 2023 | 35,00 EUR | answered by Dietrich Hohenadel
Dear tax consultant,
I am Marcus Kockel and I operate a small online trading company that sells used books. Lately, I have heard about the possibility of differential taxation and I am wondering how this could affect my sales tax.
Currently, I calculate my sales tax at the standard rate of 19% on my total sales. However, since I mainly sell used books that I acquire from private individuals, differential taxation could be an interesting option for me.
So, my current situation is that I have been calculating and remitting sales tax at the standard rate. However, I have noticed that due to the low purchase price of the used books, this can lead to a high sales tax burden.
I am concerned that I may be paying too much sales tax and thereby reducing my profit margins. That is why I would like to learn more about differential taxation and whether it could be beneficial for my company.
Could you please explain to me how differential taxation would affect my sales tax and whether it could be worth switching to it? What steps would I need to take and what requirements would my company need to meet in order to benefit from differential taxation?
Thank you in advance for your help and support.
Sincerely,
Marcus Kockel
Dear Mr. Kockel,
Thank you for your question regarding the differential taxation in relation to your online trading company that sells used books. Differential taxation is indeed an interesting option for companies trading with used items, as it helps to reduce the VAT burden, especially when purchase prices are low.
With differential taxation, VAT is not calculated on the entire selling price of the product, but only on the difference between the selling price and the purchase price. This means that VAT is only calculated on the profit from the sale of the product, not on the total revenue. This can significantly reduce the VAT burden.
In order to benefit from differential taxation, certain conditions must be met. First and foremost, the products sold must be used items purchased from private individuals. Additionally, the selling price of the product must not be higher than the purchase price, otherwise there is no difference on which VAT could be calculated.
To switch to differential taxation, you must apply for it at the tax office. You must prove that your company meets the requirements for differential taxation and submit all necessary documents. It is important to inform yourself thoroughly beforehand and, if necessary, seek professional advice to ensure that everything is done correctly.
In your case, since you mainly trade with used books and purchase prices are low, differential taxation could be a good option to reduce your VAT burden and improve your profit margins. It is definitely worth looking into this further and considering switching to differential taxation.
I hope this information helps you and answers your question regarding differential taxation. If you have any further questions or need assistance, I am happy to help.
Best regards,
Dietrich Hohenadel
Tax Advisor
