Formation of the total difference
It is easy to calculate the total difference. Find the sum of all purchase prices that were spent on purchasing the goods. You also form the sum of the proceeds from the goods that are resold in this period. The sum is always determined on the basis of the tax period . The time period is always relevant, not the good. This means that a used product can be bought in one period and resold in a later period. The difference between the two sums described is referred to as the “ total difference ”, from which the sales tax included is then calculated.
Note: The total difference is not the tax base, but the gross – amount . The sales tax is therefore not included in the calculation base, but subtracted. This means that the sales tax is calculated based on the net amount.
With regard to the tax rates that are used for the calculation, either 19 percent can be assumed or there is a reduced tax rate, which is usually 7 percent .
Differential taxation for vehicles
Differential taxation is a big topic when we think of the auto trade. Here it is common for a dealer to trade in a used car and the customer to simply pay a correspondingly lower purchase price for the new car.
The process with regard to sales tax is clearly regulated. Differential taxation is so often used here because the dealer first buys from a private person who cannot issue an invoice with sales tax and then resells the vehicle himself, typically again to a private person.
What does the process look like in detail? Let’s assume that a car dealer pays 5,000 euros for a used vehicle. A little later he sells it to a private person and receives 6,500 euros in cash. The difference is 1,500 euros. If we determine the sales tax contained therein, it is 239.50 euros. We will now deduct this, since the assessment basis for differential taxation is the net amount. The assessment basis is therefore 1,260.50 euros.
Differential taxation on cell phones
Exactly which object is bought and sold is not relevant for differential taxation as long as the requirement is met that it is a movable commodity . Thus, smartphones are of course also covered by differential taxation. They are another good example because, similar to the vehicle trade, it is often the case here that dealers take used products in part exchange .
The procedure for determining the differential taxation is exactly the same as described above in the area of vehicle sales. The decisive factor is the difference between the purchase and sales price . The sales tax included is deducted from this difference and this is how the assessment basis is calculated.
Differential taxation pattern
If you yourself as an entrepreneur repeatedly have to deal with differential taxation, you can create a simple scheme for yourself. This is even possible as a simple Excel table, for example, since the calculation itself is not complex. It is important that you always determine the records according to the observation periods for the tax. Record the amounts paid for the products and enter the resold goods with the associated prices. The calculation of the difference is simple, in the following you only calculate the included sales tax .
Warning : use the correct tax rate!
The sample for calculating the differential taxation is already ready, because after deducting the included sales tax, the calculation basis remains.
Requirements for differential taxation according to §25a UStG
The differential taxation is regulated in Section 25a of the Value Added Tax Act. It is also important, for example, that the application is indicated on the issued invoice and that it is a matter of movable consumer goods that were purchased without sales tax.
Advantages and disadvantages of differential taxation
In principle, there are no direct advantages or disadvantages, since ultimately all retailers who are affected by these requirements have to follow the same procedure. At first glance, the application of differential taxation may seem more complex than it actually is. So if you have to deal with it regularly, you will not have any problems in processing.
Record keeping and regulations
In order for you to be able to use differential taxation without any problems, comply with some important requirements. This includes that reference is made to the application of differential taxation on the invoice. In addition, there must be a note in which reference is made to the special rules and the respective product category (eg “works of art”). Anyone who does not operate with an overall difference must record the purchase price, sales price and margin separately for all items , in addition to the accounting that is already necessary.
Anyone who issues invoices must also keep records accordingly. To make your work easier, you can use an automated invoice program for this.
At first glance, differential taxation looks complicated, but it is a simple exercise for all traders who regularly shop without sales tax and subsequently sell on to private individuals . Note the requirements and formal requirements so that they are actually used. With simple calculation schemes, it is possible to determine the tax base and thus deduct the correct tax amount. In sum, taxation can be handled with a manageable amount of effort and is a practical option for traders.