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How VAT is applied
Tax is decided per line, not per document — and what you owe is the difference between two totals, not a percentage of your sales.
- Steps
- 5 · About 3 min
- Who can do this
- Owner · Manager · Accountant · Team member · Read only
Two ideas explain nearly every VAT question people ask about this product.
Tax belongs to the line, not the document
Each line on an invoice carries its own tax code, and the tax is worked out line by line and then added up. There is no "VAT rate" on a document.
That is why an invoice can mix 19%, 9% and exempt lines and still total correctly, and why the printed document shows tax per line as well as a single tax total. A customer who queries one item can be answered without recomputing the whole invoice.
Where does a line's rate come from? The product. A line takes the tax code of the item you put on it, which is why getting a product's tax code right once is worth more than checking a hundred invoices.
What you owe is a difference
VAT you charged your customers is collected. VAT you were charged by your suppliers is deductible. What you owe the tax authority is the first minus the second.
This is the part that surprises people: a month of large sales can produce a small VAT bill, because you bought a great deal that month too. And a quiet month can produce a large one. Your VAT position tracks the gap between the two sides, not the size of your business.
It also means a supplier invoice you have not recorded is money you are paying twice — once to the supplier, and again to the tax authority for a deduction you did not claim.
What moves it, and what does not
Moves it: confirmed sales invoices, recorded supplier invoices, credit notes in either direction (which reverse tax in the period the credit falls in), and counter sales.
Does not move it: quotations, deliveries, payments, stock movements, and imported opening balances. Paying an invoice does not create tax — the invoice already did. This is why your VAT position and your bank balance are unrelated numbers.
The period is what matters
VAT belongs to the period of the document, not the payment. An invoice dated the last day of the month is that month's VAT even if it is paid three months later.
That is why a back-dated document changes a declaration you have already filed, and why closing a period after you declare is not bureaucracy.
Before you file
The VAT view totals both sides for a period and shows the difference — the figure that becomes your G50. Read it before you file, not after: everything it shows is traceable back to documents while the month is fresh, and much harder to explain once it is not.
Your fiscal regime decides how all of this applies to you. Set it correctly before raising documents — a business on IFU and one on the real regime do not owe the same thing on the same sale.
Next, you might want to
- Check your VAT before preparing the G50Reconcile the VAT your documents say you owe against the VAT actually posted, and clear the exceptions before you file.
- Create and confirm a sales invoiceBill a customer for goods or services, then confirm it so it counts in your books.
- Set regional and fiscal defaultsThe company's own language, its timezone, and the tax regime it files under.