VAT payer

What it means

A VAT payer is a person registered for value added tax who charges VAT to customers, pays it over to the state and deducts VAT on purchases for the business. On registration it receives a VAT number, which it shows on its invoices.

A company becomes a VAT payer either compulsorily, when its turnover exceeds the statutory threshold under registration under section 4, or voluntarily. It differs from a person registered under sections 7 and 7a, who pays VAT only on EU acquisitions and cross-border services and has no right to deduct.

A VAT payer files a VAT return and a VAT control statement for each tax period, monthly or quarterly, plus an EC sales list for supplies to the EU. The list of VAT payers is public, so customers can check the registration.

How it works in practice

After registration we set up the books and invoicing: VAT rates, invoice requirements, the reverse charge for certain supplies and records for the control statement. We watch the first months more closely, as that is when mistakes are most common.

The input VAT deduction is the main advantage of being a VAT payer. We claim it only on purchases used for taxable supplies, and for mixed use, such as a car also used privately, only proportionally. The right arises on the basis of a valid invoice.

For every new supplier we check that it is on the VAT register and not on the list of entities with grounds for deregistration. With such a supplier the customer may become liable for unpaid VAT, so we warn the client before payment is made.

What to watch out for

A VAT payer must pay over VAT even if the customer has not paid the invoice. With slow payers this means the company finances the state out of its own pocket. The cash accounting scheme can help if the company is eligible, or tighter management of receivables.

A VAT payer that fails in its obligations, for example repeatedly not filing returns, may be put on the list of entities with grounds for deregistration. This deters customers, and on a new registration the tax office may demand a VAT security deposit.