What is the difference between turnover and profit?
Short answer
Turnover is everything you invoice to customers, excluding VAT. Profit is what remains after you deduct your business costs and depreciation from your turnover. You pay VAT on your turnover and income tax or corporate income tax on your profit.
Updated on · Reviewed by the tax advisers at Boekhoudvriend
The difference seems simple, but in practice turnover, profit and your bank balance are often confused. Your bank balance, for example, also includes VAT that you still have to pay.
An example
- You invoice €60,000 plus €12,600 VAT: your turnover is €60,000
- Your costs are €12,000 and you depreciate €3,000 on your laptop and van
- Your profit is €45,000, and you pay income tax on it after deductions
- You pay the €12,600 VAT, minus the VAT on your costs
Sources
This answer is general information, not personal advice. Your own situation may work out differently, so feel free to ask our team.