The moment you become an entrepreneur in the Netherlands or when you start up your BV company, you are required to process a bookkeeping. A rejected bookkeeping presents an rather undesired situation.
Bookkeeping meeting tax office requirements
A bookkeeping that meets the tax office requirements is one from which it becomes immediately clear what is the situation. That implies it is processed in an orderly understandable method, easy to access and easy to do random checks.
It is possible to outsource the bookkeeping, for instance to your accountant or to a company in countries like India. However, upon request by the tax office you need to be able to present the bookkeeping in a reasonable period of time. Commonly taken that is a two weeks period reasonable.
Bookkeeping foreign language
The bookkeeping needs to be easily accessible by the Dutch tax office. If you create a English language bookkeeping system, the Dutch tax office can understand that up to a certain moment. German is becoming more difficult as we have less German detectives on Dutch TV. French is a problem, as that language is taught not that much anymore in the Netherlands.
We had a Japanese client. The Japanese client was announced that an audit of the books would take place. I was present during that audit to learn that the nice Japanese lady ordered the books Japanese style. Japanese style is Japanese language starting up and going down (vertical). That is not in line with what the tax office expected. During the audit we were able to create the overview with the bookkeeping done and in the end the audit was a success. No rejected bookkeeping.
Rejected bookkeeping lawyer in Word format
A Dutch lawyer processed his bookkeeping in a Word document. During an audit of the books the tax office explained how the bookkeeping can be done in excel or what bookkeeping programs could be purchased. The tax inspector issued an ex officio assessment as a result of the audit which would be nullified if the lawyer would present the bookkeeping in at least an excel file.
The lawyer did not respond to the tax inspector his ultimatum. The tax inspector issued a statement that the minimum requirements for keeping the books were not met. That implies the full administration is rejected, an ex officio random amount of VAT and profit is stated by the tax inspector. The amounts are such that you are forced to appeal that. As the bookkeeping is rejected, you need to find alternative methods to appeal the ex officio random assessments.
As you can expect from a lawyer he went to court. In court the tax inspector forgot to proof that the administration done was not meeting the standard. Even worse, the court took notice of the administration brought to court by the lawyer and could not find a problem examining the administration. The fact that a Word document was used instead of an Excel document did not implicate that the administration was not done in an orderly method.
Hence the tax inspector was ruled to be wrong, the administration was accepted, the ex officio assessments were nullified and the lawyer received a reimbursement of costs made for doing the bookkeeping by another company for the period under discussion.
Orange Tax Services
We can understand the fact that an excel overview makes automatic up counts of numbers where a Word document does not process this. That is not the same as a Word document not being trustworthy.
Excel is the better solution compared with a Word document. However, using a genuine bookkeeping program is of course the method to process the accounts. Most clients think to save on accounting costs by doing it themselves. Not only it cost them headaches to process the bookkeeping, moreover, the accounting costs are higher as everything needs to be checked to see if it has been done correctly. Therefore we recommend to have the bookkeeper do the bookkeeping and the entrepreneur do what the entrepreneur is good at. To prevent a rejected bookkeeping.