Neutrality via the net all-phase principle with input
tax deduction
The common VAT system is based on the following principle: Each
taxable company in the supply chain calculates the sales tax
based on the consideration it receives from its respective
customer at the tax rate applicable to the delivery or service
provided. At the same time, it determines the previous sales
that it used to carry out its deliveries and provision of its
services, and the sales tax that was billed to it for this.
It deducts this sales tax from its tax liability as input
tax. The difference is paid as a payment burden to the tax
office. The common VAT system is applied up to the retail level.
The subjective right to deduct input tax must be assessed
individually at all levels along the service chain. The person who
is economically burdened by VAT (taxpayer) is the end
consumer. The burden on final consumption is achieved by
eliminating the input tax deduction at the end-user level.
