Accounting for the refund of the VAT credit

Many companies regularly face situations where the amount of deductible VAT due to the company is higher than the amount of VAT collected and repaid to the State. For best training Best school of accountancy In Lahore. In this case, the company can benefit from a VAT credit and therefore benefit from a refund. That's how it counts...

The VAT credit: its calculation and its use

Because of their activity, some companies are frequently in VAT credit situation. This is the case for companies buying in France to resell abroad, buying at the normal rate to resell at a reduced rate or constituting large stocks of goods that they are struggling to sell.

The VAT credit, which is similar to a tax liability of the State towards the company, is calculated very simply from the following formula:

If a company has a VAT credit, it can use it in two ways:

• It may request the refund of this VAT credit to the State. Under the simplified VAT regime, the annual application is possible if the reimbursement exceeds 150 €. Under the actual VAT system, the refund can be immediate as soon as it exceeds 760 €
• It may charge the credit it owns to the next VAT return. This will therefore be added to a possible VAT credit in n + 1 or reduce the VAT to be paid

The accounting entry for the VAT refund

To write a VAT refund, this will take place in 3 steps:

• First, you must register the VAT credit. To do this, you must credit account "445660 - VAT on purchases" and debit account "445730 - VAT on sales" and account "445670 - VAT credit to be carried forward"
• Then the refund request must be entered by debiting account "445670 - VAT credit to be carried forward" and crediting account "445830 - Refund of VAT"
• Finally, the refund of the tax administration must be registered by debiting the account "445830 - VAT Refund" and crediting the "512 Bank" account.