3.2.6. Government receivables

Includes any balance that is in favor of the company regarding its tax obligations. It can be due to:

  • Corporate tax payment in advance
  • VAT balances
  • Other regularizations
Example – VAT receivable

During the accounting year, the company sold 500.000€ of goods and acquired 600.000€ of raw materials and other services it needed to operate. VAT was charged on every transaction at 15% rate. That means the company paid more VAT than it collected in the amount of 15.000€. This amount is a credit that the company owns:

Deductible VAT=600.000×0,15=90.000

Liquidated VAT=500.000×0,15=75.000

Owed to the company=90.000-75.000=15.000

Example – IRC payment in advance

The corporate tax systems of several countries require companies to make payments in advance, meaning paying before the year end when the corporate tax can be effectively calculated. These payments are usually calculated with basis on the tax the company had to pay in previous years. Lets assume the company was required to make three payments of 10.000€, adding up to 30.000€. At the end of the year the calculated corporate tax is only 25.000€, meaning that the company has a credit of 5.000€.