How to deduct VAT from expenses incurred before starting a business?


An entrepreneur setting up a business often does not wait until the last minute to purchase the necessary equipment or goods and materials. There is nothing surprising in this proceeding, as the expenses incurred before the commencement of operations and related to its launch may be included in tax deductible costs. Moreover, active VAT taxpayers may also be able to deduct the tax charged on purchases.

To become a VAT payer, a new entrepreneur is required to submit a VAT-R form to the tax office. Only after registering, it will be possible to deduct VAT on purchases made for business purposes - also from those purchased before starting the business.

It is worth remembering that the entrepreneur has the right to deduct VAT in the period of receipt of the purchase invoice or in one of the next two. Therefore, most often it will be possible to deduct VAT only up to two months back. However, there are also two methods that extend possible tax return periods.

The first of them should be used when completing the VAT-R form - in part C.2, intended for information on the submitted information, the entrepreneur has the option to mark the date for which he / she submits the first declaration. Such a date may be given “backwards” - it may be earlier than the date of filing the application. You can then choose a period in which it will be possible to settle all previous expenses. The downside of this method, however, is that it will be necessary to submit all overdue returns for each period up to the current period in which the taxpayer registered.

Another solution, however, is to choose the quarterly method of VAT settlement. It should be noted that in such a situation the "backwards" calculation increases from two months to two periods, ie - in practice - 6 months. Of course, the quarterly method of accounting for VAT is not only used to deduct input tax on purchases prior to company registration - it also has a number of other advantages and uses.

As you can see, the VAT charged before the start of business does not have to be lost. It is worth considering the possibilities described above before you start planning your new business.