VAT is an indirect tax to the government. VAT is included in the price of most goods and services. The current VAT rate is 25%.
When Henrik works out the price of a job, this is the price the company charges for the service. When the customer pays, he or she must pay 25% VAT in addition to the company’s price (net price). This is money that the company collects on behalf of the government, but the company is obligated to report everything that has been sold and the prices that have been paid, and then transfers the entire tax to the government. VAT is paid six times per year.
Incoming and outgoing VAT are concepts we use in our operations.
The VAT that is paid by the company is deducted from the VAT settlement. For example, we can deduct the VAT we pay for diesel fuel, car maintenance, cleaning supplies, etc. This is incoming VAT. What a customer pays for transport is outgoing VAT.
The VAT return is an overview of the basis for tax as well as incoming VAT and outgoing VAT. It is submitted one month and ten days after the end of the applicable time period. This is in order to give the customers time to pay their invoices before the VAT is transferred. If an invoice is not paid the company must still pay the VAT. So it is important to make sure that the customer receives the invoice as quickly as possible. It is the County Tax Assessment Office that collects the VAT. I send the reports of VAT through the online service Altinn.
The maths look like this:
Outgoing VAT
– Incoming VAT
= VAT owed to the government
If the company has paid more outgoing VAT than it has incoming VAT, this means that it has payment due, and the amount is paid back from the County Tax Assessment Office to the company.
I keep meticulous accounts of all payments, expenses, taxes and duties. All forms relating to the Chief Municipal Treasurer, the County Tax Assessment Office, the Register of Employers and Employees, the company pension, etc. are filed carefully. The same applies to all receipts for payments and expenses. I have filed everything both electronically and on paper. The tax authorities might audit the company to inspect the accounts and payments, and it is important that everything is in order. After ten years the files can be discarded.
A company can be penalised for inconsistencies in the payment of taxes and duties, and the penalty is in proportion to the amount of money in question.