Everything you need to know about the equivalence surcharge

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If you are self-employed, retail entrepreneur or intermediary, you should know everything about the equivalence surcharge . Truth be told, it greatly simplifies the accounting and tax obligations of traders.

Why? We tell you all about it in this post.

When is the equivalence surcharge applied?

The equivalence surcharge is a type of special VAT regime, which applies mainly to those who make the sale of products to the final customer, not having produced or transformed the same.

To make you understand better, if you have an online sportswear shop and you acquire the products through a supplier or several suppliers, with the aim of selling them to the end customer, then you will be subject to this type of regime.

Note that it is not applicable to all small businesses. Among the economic activities that do not use this type of regime are: jewelry stores, car dealerships, gas stations, art galleries, sale of boats and air transportation.

How does it work?

In the commercial process, it will be the supplier who will have to include VAT and equivalence surcharge in the invoice issued. In other words, when a freelancer or small trader makes a specific purchase for their business, it will come with VAT and surcharge.

However, it is important to know that the purchase of any good or article for internal consumption of the company should not have this surcharge applied

To give you an example, if your sportswear shop needs reams of paper for the printers, and it is obviously not part of the sales process of your business, the surcharge rate should not be applied to the invoices issued for that purchase.

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I’m sure you’re wondering: Why does it exist?

Quite simply, it is a mechanism that exempts retailers from submitting VAT returns to the Inland Revenue, since, as we explained above, they pay the VAT and the equivalence surcharge directly to the suppliers who issue the invoices.

So, if this is your case, you can say goodbye to the tedium of tax management.

VAT and equivalence surcharge go hand in hand, as one will depend on the proportion of the other. You should know that there are three types of equivalence surcharge . They are

  • General VAT at 21%: 5.2% equivalence surcharge
  • VAT reduced to 10%: equivalence surcharge of 1.4%
  • Super reduced VAT at 4%: equivalence surcharge of 0.5%

How would these amounts be reflected in the invoice?

Simple. Let’s imagine that your sportswear company makes a purchase of 1 000.00 EUR worth of products taxed at 21% VAT. The math would be:

  • Base to be charged: 1 000.00 EUR
  • General VAT at 21%: 210 EUR
  • Equivalence surcharge of 5.2% (of 1 000.00 EUR): 52 UER
  • Total, to be allocated: 1 262.00 EUR

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