Importance of VAT deduction

[sakibkhan22197]

All of this is regulated by Law 37/1992, of December 28, on Value Added Tax . It establishes the requirements for deducting VAT during the quarterly tax return, i.e. Form 303 .

What is non-deductible VAT?
We can easily see that non-deductible VAT is the one involved in the purchase of products or services that are not going to be used for the activity carried out by the company. This tax is part of the fee that you have to submit to the Tax Agency .

Understanding the difference between deductible VAT and non-deductible VAT is essential, as this can prevent you from incurring penalties on your tax return in the future.

Also considered non-deductible VAT is that which, although involved in business activity, does not meet all the requirements established in Article 93 of Law 37/1992.


The main objective of deductible VAT is to neutralize the tax burden on companies and self-employed workers, that is, it seeks to prevent the collection of the tax from affecting the profitability list of canada cell phone number of the business. We can also highlight other benefits such as:

Avoid double taxation when buying and selling goods and services;
Helps ensure that VAT collection does not affect companies' profit margins;
Promotes the acquisition of new technologies to improve service;
Promotes business growth and investments;
It simplifies the tax management of the business a little;
It requires deductions to be justified and thus reduces the possibility of committing tax fraud.
What types of VAT exist and what are they?
Now that you know what deductible VAT is and its importance, we can talk about the different types of taxes that exist.

In this regard, it is important to mention that not all products or services have the same VAT, since there are some special cases where end consumers can pay a reduced tax. Let's see what the applicable percentages are according to the type of expenses incurred:

General rate : This is the rate that taxes the largest number of products, as it includes all those that qualify under the other two types. A tax rate of 21% is applied.
Reduced rate : Article 91 of Law 37/1992 establishes a VAT rate of 10% for products such as food for people and animals, water, medical equipment and pharmaceutical products, among others.
Super-reduced rate : the same article tells us that basic necessities have an even lower tax rate of 4%. These products include common bread, fruit, vegetables, books and services for people with disabilities, among others.
Knowing the tax rate applied to each product or service is essential, as it allows you to correctly calculate the VAT that you have to declare to the Tax Agency, as well as the deductible VAT that you can apply.