Why Vat is Such an Important Process? We Answer

As soon as a person carries out economic transactions such as the sale of goods or the provision of services, independently and in a customary manner, he is liable to VAT.

Definition of the taxable person

A taxable person is a person who habitually carries out economic transactions, being independent and acting as such. It can be a sale, a rental or a service. The sectors of activity concerned are numerous: civil activity, industrial activity, agricultural activity, commercial activity.

However, the exercise of a usual economic activity does not prevent certain operations from being carried out in a private capacity. For example, when a taxable person sells a building of which a part is reserved for his private use, the VAT must relate only to the part of the building corresponding to a professional use.

Being a taxable person does not necessarily mean that you will have to show VAT on your invoices and deduct the VAT paid. There are indeed various exemptions and specific VAT regimes, for example the VAT-based exemption regime. Using the self employment tax calculator happens to be essential in this case.

A person may be subject to VAT:

Whether it is taxed on income or corporation tax,

Whether it is a natural person or a legal person (company, association, etc.),

Whether or not it pays income tax or corporation tax,

Even if it carries out operations which fall within the scope of VAT but which are the subject of a specific exemption.

Who is not subject to VAT?

Persons who do not carry out an activity under their own responsibility and do not enjoy complete freedom in the organization and execution of the work involved are not liable to VAT.

Thus, are not considered as taxable persons:

  • Persons bound by an employment contract,
  • Homeworkers whose earnings are considered wages,
  • People who do not carry out an economic activity on a recurring or permanent basis

Please note, corporate directors are always supposed to act independently as long as no subordinate link exists. Consequently, the remuneration of SAS presidents and managers who are legal persons are subject to VAT.

To be able to benefit from this additional VAT deduction, the following four conditions must be met:

  1. Resale within five years. The sale must take place before the end of the fourth year following that of the initial purchase.
  2. The initial VAT not deducted. The initial VAT must not have been deducted, in whole or in part.
  3. Resale subject to VAT on the total price. The sale price excluding tax of the property must correspond to the sale price to a non-trader, such as an individual for example.
  4. A deduction lower than the returned VAT. The additional deduction cannot exceed the VAT due as a result of the sale.

By reselling this vehicle to a dealer in car dealer, your company can therefore voluntarily subject this sale to VAT in order to be able to recover, under conditions, part of the VAT initially paid.

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