Keep your accounting simple can be a no brainer for some and a game spoiler for the other. What is wise?
As per October 2012 the VAT percentage went from 19% to 21%. You might wonder why I go back this far, but only this month a court case was finished about a lengthy debate about the lower percentage being applicable or not.
The argument was of course about whether the 19% VAT rate was applicable as the deal was agreed upon before the date of change of VAT rate, or whether the actual signing which took place after the date was applicable. The latter was the case, hence the company had to pay EUR 96.287 VAT, being the 2% difference plus interest over all these years to the tax office.
Of course the VAT can be charged to the client, but a good chance exist the client is no longer there.
The creative accounting to allocate the percentage to the moment the contract was agreed upon bites back many years later.
VAT on boats
I remember an older case where the rich ordered a Dutch vessel to be build and it was then advised by a large bank to have the vessel delivered at 0% VAT in Belgium and the owner simply sailed back to the Netherlands and no 19% VAT was due. That construction was shot to pieces as well many years later. If you cannot afford the tax, do not purchase the vessel. The annual maintenance costs are more or less the same I have been told.
VAT is dangerous keep your accounting simple
These examples are about Value Added Tax (VAT). What I want to point out is that it can take many years before you learn whether your clever accounting did actually do the trick.
It is not only about the time frame of uncertainty but if you lose, you need to pay back a lot of money. Have you spend that already? Most human beings have.
The dangerous aspect is that the Dutch tax office is very keen to allocate a wrong full process of the VAT as money laundering. In the sense that the entrepreneur does not pay the VAT to the Dutch tax office, but the client of the entrepreneur had already reclaimed the VAT. Money laundering is a criminal offence.
We might be a bit straight forward with maintaining ‘keep your accounting simple’ bookkeeping rules, but we have the opinion that our clients simply want to have done their accounting in the correct manner. Not in the questionable manner, neither do we feel comfortable with such accounting. It goes without saying that a client should of course be assisted in claiming for right full tax credits. Right full in the sense of black and white rules. Grey rules are not part of our services.