When a company buys equipment for its warehouse, the VAT on that invoice is not an expense: it is a tax credit, an amount that is offset against the VAT the company charges on its own sales. The problem appears when the purchase is large and that credit exceeds several months of output VAT in a row: a favourable balance sits there, frozen. Here we explain how it arises, which routes exist to recover it and what documentation you need. STOKA does not provide tax advice: the specific treatment of each transaction is confirmed by your company tax adviser.
What a VAT tax credit is, in one sentence
When your company buys something with a type A invoice, the VAT itemised on that invoice is input tax credit: an amount you can deduct from the VAT you charge on your own sales, which is output tax. Month by month, the VAT return compares the two. If output tax is higher, you pay the difference. If the credit is higher, a favourable balance carries over to the next period. So far the mechanism is identical for a ream of paper and for a stacker crane. The difference is scale: buying capital goods concentrates in a single period a credit that can equal many months of normal operation. That is where the issue this article deals with begins.
Can you recover the VAT paid on a machine?
Yes, though rarely through the route people imagine. The first and most common one is not a refund but absorption: the favourable balance is gradually consumed against the output tax of the following periods until it runs out. If your company invoices steadily, a large credit can absorb itself and all you have to do is carry it forward. An actual refund, by contrast, is a specific regime: it has requirements, waiting periods and prior registration, and it is filed by the buying company before ARCA, with its tax adviser. It is not automatic, the supplier does not handle it and it does not depend on which equipment you buy. What STOKA contributes is the technical and commercial documentation that filing requires.
Why the credit on capital goods gets frozen
Capital goods — racking, a stacker crane, a conveyor line, the management software — are paid for once and used for years. VAT, on the other hand, hits in full in the period when the goods are invoiced or cleared through customs. If the company is going through a slow sales stretch, or if the project is large relative to its turnover, that credit finds no output tax to offset against and simply sits there. In the trade it is called a technical balance: it exists, it shows on the VAT return, but it can only be used against future VAT. A freely available balance is different: it can be offset against other taxes or claimed as a refund under the applicable regime. Confusing the two is the most expensive mistake in this field. And since installing an automated system takes 3 to 4 months from the purchase order (STOKA), payments and VAT concentrate in few periods: the effect shows.
Which routes exist to recover the favourable balance
There are four, and it pays to look at them in order. The first is absorption against future output tax, which requires no filing. The second is the VAT refund regime for investments in capital goods set out in the VAT law: it requires waiting a set period, proving the balance remains unabsorbed and filing the complete dossier. The third is RIMI, the incentive regime for medium-sized investments, which for registered companies shortens the wait before the VAT on the investment can be recovered; the benefit depends on prior registration and on meeting the requirements of the regime, it does not apply by itself. The fourth, when the balance is freely available, is offsetting it against other taxes. How many periods you must wait, and which caps and quotas apply, changes with the rules in force: your tax adviser confirms that.
What documentation you need
The dossier is built during the project, not afterwards. Typically: a type A invoice with VAT itemised, delivery notes and bank-traceable payment records; if the equipment is imported, the import clearance document with the duty settlement showing the VAT paid at customs; the purchase order or contract; the accounting entry recording the asset as fixed assets, with its commissioning date; the acceptance record and the commissioning record; and the technical documentation proving these are capital goods used for production. For every project STOKA delivers the equipment data sheets, the component breakdown, the purchase order and the acceptance and commissioning records. Your accountant builds the rest around that.
When this should not drive the decision
Value recovered time using your actual operating costs and measurements of the tasks that change. Distinguish time available for other work, reduced overtime and expenses that can actually be avoided.
What to do with this
The VAT on an investment in capital goods is not lost, but it can sit still for a long time if nobody plans for it. Two things make sense: projecting with your accountant how the favourable balance will evolve month by month before you sign, and building the documentary dossier during the works rather than once they are over. STOKA contributes the technical and commercial part of that dossier, and structures the project so the investment is justified by the process. The tax treatment is always defined by your company adviser.
Frequently asked questions
Yes. The VAT paid when clearing goods through customs is documented in the import clearance record and is computed as input tax credit in the same way as VAT on a local type A invoice. The practical difference is that the cash goes out at customs, before the equipment is installed and producing. The specific treatment is confirmed by your company tax adviser.
A technical balance arises when input tax credit exceeds output tax for the period and can only be used against future VAT: it cannot be offset against other taxes or claimed as a refund through the general route. A freely available balance comes from withholdings, collections and advance payments, and does allow offsetting or a refund. Telling them apart is the first step in any planning.
No. STOKA designs, imports, installs, integrates and supports the systems, and delivers all the technical and commercial documentation of the project: equipment data sheets, component breakdown, purchase order and acceptance and commissioning records. Filing with ARCA and the tax treatment are the responsibility of the buying company and its adviser.
Yes, quite a lot. Regimes such as RIMI offer registered companies more favourable conditions for recovering the VAT on the investment than the general regime does. But the benefit is not automatic: it depends on prior registration, on meeting the requirements and on the quotas in force. If you are not registered, the general regime applies.
Rarely. The tax calendar is one more variable, not the main one: installing an automated system takes 3 to 4 months from the purchase order, and moving the signature also moves commissioning and the operating savings. The sensible thing is to project the favourable balance with your accountant before deciding, not afterwards.