Cash Accounting for VAT: A Guide for Businesses

• Cash accounting is an option for businesses with limited turnover, allowing them to pay VAT only after receiving payment.
• This helps manage liquidity and avoid burdensome tax advances.
• Cash accounting applies to sales of goods and services by taxpayers with a turnover not exceeding 2 million euros, to buyers or clients acting in the exercise of a business, art, or profession.
• VAT becomes payable at the time of payment of the related consideration.
• The right to deduct VAT for purchases arises at the time of payment of the related consideration.
• The right to deduct VAT for the buyer or client arises at the time of the transaction, even if the consideration has not yet been paid.
• The deferral of the liability and the deduction relating to purchases made by the subject opting for cash accounting is limited in time, as the VAT becomes payable and deductible after one year from the date of the transaction, unless, before the expiry of this period, the buyer or client has been subject to insolvency proceedings.
• The choice of cash accounting is inferred from the taxpayer’s conclusive behavior, even if it is necessary to indicate the option in the VAT return (VO section).

Source: commercialistatelematico.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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