What is the equivalence surcharge?
Posted: Mon Jan 06, 2025 8:32 am
If you are self-employed or are thinking of opening a business, it is interesting to know what obligations you will have with the Treasury. On this occasion we will talk about the equivalence surcharge. A mandatory VAT for retail traders.
Sometimes, controlling VAT can seem like a simple matter of knowing whether you have to apply 15% or 21% (or any other percentage). But, when it comes down to it, things are never that easy: this is a really complex tax that needs to be controlled in all its intricacies. One of those intricacies is, precisely, the equivalence surcharge… Do you know exactly what it is? Do you know if you should apply it to your invoices? Do you want to know how to do it? Below, we explain everything about this surcharge linked to VAT.
What is the equivalence surcharge?
The equivalence surcharge is a special type of tax . Technically speaking, it must be considered a special VAT regime that is mandatory for retail traders who do not transform the products they sell.
Within the category of retail merchants malaysia number data we consider all merchants who sell to end customers, whether they are self-employed, companies or communities of property.
Who should apply it?
Normally, it is the supplier who issues the invoice with the equivalence surcharge , but the retailer is obliged to inform its supplier of the fact that it is subject to the equivalence surcharge regime.
This equivalence surcharge directly affects any legal entity that acts as an intermediary, purchasing a product (which is not altered at any time) to sell it directly to a third party.
Most shops carry out an activity that is subject to this type of VAT, but as we will see below, there are some exceptions.
When the retailer must invoice
Although most of the time it is the supplier who invoices, there are times when the retailer must issue the invoice. These are:
When the end customer requests the invoice.
When deliveries of properties subject to VAT are made
When intra-community operations or exports are carried out.
When sold to the Public Administration or a legal entity.
Application exceptions
Below, we will explain what types of businesses and activities are exempt from applying the equivalence surcharge.
Wholesalers. According to the above definition, wholesalers are therefore excluded from this surcharge regime.
Some types of activities. There are also other exceptions to be taken into account, such as industrial activities, services, or exceptional cases of retail trade, such as jewelry, fur shops, car, boat or airplane dealerships, art, gas stations or marketing of industrial machinery or minerals.
Self-employed persons who invoice more than 20% to professional clients. But these are not the only exceptions to be taken into account with the equivalence surcharge. Self-employed persons who invoice more than 20% of their sales to professional clients and entrepreneurs in a year can be released from this obligation and move to the general VAT regime. (To do so, however, they must inform the Treasury at the end of the year, providing sufficient supporting documents.)
Due to lack of activity and taxation based on objective assessment. Two final exceptions: if no activity has been carried out in the last fiscal year or if taxation is based on objective assessment in personal income tax, payment of the equivalence surcharge can be avoided.
However, again, these exceptions must be demonstrated to Social Security at the end of the fiscal year. And they also involve further complications, which we will see a little later.
How is this surcharge regime applied?
For retail trade, the equivalence surcharge means paying a slightly higher tax than normal in exchange for not having to file VAT returns with the Treasury . In this way, the VAT is paid directly to your supplier and tax management is greatly simplified. It is only applied to invoices for goods corresponding to merchandise or goods.
This means that there are basically two possible scenarios when dealing with equivalence surcharges. The first possibility is that the retailer is subject to the equivalence surcharge regime, which will require him to notify his supplier to issue an invoice applying this type of VAT. This implies that the retailer pays the VAT directly to the supplier.
A second possibility, however, is that it is the retailer who has to issue the invoice, so the general VAT regime must be supplemented by this equivalence surcharge which, in this case, functions as a kind of additional VAT.
Sometimes, controlling VAT can seem like a simple matter of knowing whether you have to apply 15% or 21% (or any other percentage). But, when it comes down to it, things are never that easy: this is a really complex tax that needs to be controlled in all its intricacies. One of those intricacies is, precisely, the equivalence surcharge… Do you know exactly what it is? Do you know if you should apply it to your invoices? Do you want to know how to do it? Below, we explain everything about this surcharge linked to VAT.
What is the equivalence surcharge?
The equivalence surcharge is a special type of tax . Technically speaking, it must be considered a special VAT regime that is mandatory for retail traders who do not transform the products they sell.
Within the category of retail merchants malaysia number data we consider all merchants who sell to end customers, whether they are self-employed, companies or communities of property.
Who should apply it?
Normally, it is the supplier who issues the invoice with the equivalence surcharge , but the retailer is obliged to inform its supplier of the fact that it is subject to the equivalence surcharge regime.
This equivalence surcharge directly affects any legal entity that acts as an intermediary, purchasing a product (which is not altered at any time) to sell it directly to a third party.
Most shops carry out an activity that is subject to this type of VAT, but as we will see below, there are some exceptions.
When the retailer must invoice
Although most of the time it is the supplier who invoices, there are times when the retailer must issue the invoice. These are:
When the end customer requests the invoice.
When deliveries of properties subject to VAT are made
When intra-community operations or exports are carried out.
When sold to the Public Administration or a legal entity.
Application exceptions
Below, we will explain what types of businesses and activities are exempt from applying the equivalence surcharge.
Wholesalers. According to the above definition, wholesalers are therefore excluded from this surcharge regime.
Some types of activities. There are also other exceptions to be taken into account, such as industrial activities, services, or exceptional cases of retail trade, such as jewelry, fur shops, car, boat or airplane dealerships, art, gas stations or marketing of industrial machinery or minerals.
Self-employed persons who invoice more than 20% to professional clients. But these are not the only exceptions to be taken into account with the equivalence surcharge. Self-employed persons who invoice more than 20% of their sales to professional clients and entrepreneurs in a year can be released from this obligation and move to the general VAT regime. (To do so, however, they must inform the Treasury at the end of the year, providing sufficient supporting documents.)
Due to lack of activity and taxation based on objective assessment. Two final exceptions: if no activity has been carried out in the last fiscal year or if taxation is based on objective assessment in personal income tax, payment of the equivalence surcharge can be avoided.
However, again, these exceptions must be demonstrated to Social Security at the end of the fiscal year. And they also involve further complications, which we will see a little later.
How is this surcharge regime applied?
For retail trade, the equivalence surcharge means paying a slightly higher tax than normal in exchange for not having to file VAT returns with the Treasury . In this way, the VAT is paid directly to your supplier and tax management is greatly simplified. It is only applied to invoices for goods corresponding to merchandise or goods.
This means that there are basically two possible scenarios when dealing with equivalence surcharges. The first possibility is that the retailer is subject to the equivalence surcharge regime, which will require him to notify his supplier to issue an invoice applying this type of VAT. This implies that the retailer pays the VAT directly to the supplier.
A second possibility, however, is that it is the retailer who has to issue the invoice, so the general VAT regime must be supplemented by this equivalence surcharge which, in this case, functions as a kind of additional VAT.