False invoices and VAT is a problem. A problem you may not have intended to cause, but can be easily caused. What is this about?
False invoices and VAT
VAT stands for Value Added Tax and this department of the Dutch tax office we always refer to as the department with humorless civil servants. The reason for this remark is their strictness and their connections with the justice department. A fraudulent case is send to jail, where normally a financial penalty is issued.
VAT department too strict?
I think not and I think this needs some explanation. The women that opened my eyes (tax wise) is Ms Van Vilsteren. She once said during a VAT course if I would accept a EUR 50 bank note she freshly copied in the hall, for one of my EUR 50 in my wallet. Ofcourse not. But she argued it was a colored copy! Still not. And that is how you need to see an invoice, she said. Like a EUR 50 banknote.
A banknote has a number of criteria that makes it true or false. And if false you cannot use it and if you do use it, you go to jail. Article 35a of the VAT act states clearly what criteria an invoice needs to contain in order to be a true invoice and not a false invoice. No rocket science, simply putting the administrative details on the invoice.
How can this go wrong?
If you are the entrepreneur issuing incorrect invoices, you have a problem. That is easy to understand. What if you are doing it by the book, but your clients are not. If your clients send you an invoice and one of the aspects of the invoice is incorrect, you cannot claim back the paid VAT.
You might think that one invoice is not too bad, maybe not. But what if we inform you that the Dutch tax office labels this as money laundering? Are you then as relaxed as you were initially. Indeed, the VAT department of the Dutch tax office labels a VAT return in which more VAT is claimed back then possible as money laundering. They use their entrance of justice department to prosecute you, that is how jail time come into the picture.
What aspect on the invoice is often misunderstood?
Obvious obligations on the invoice such as name, address, date, chamber of commerce number and specification of the service or goods is obviously done correct we assume. The issue often in international relations. When an invoice at 0% is send to another EU country, the other EU country VAT number needs to be mentioned on the invoice. Plus some formal statement about reverse charged turnover. If not done, you cannot charge 0%, hence a false invoice lacking 21% VAT.
Or in the situation that you export goods to another EU country, hence you claim the 0% on the invoice plus all the requirement. Then you decide to bring the goods yourself. If you bring the goods yourself, it cannot be a 0% transaction and is regarded a local delivery in that other EU country. The other EU country VAT rate applies.
You send an invoice to a private individual in another EU country like Denmark, Sweden, Hungary, Poland, Czech Republic, Bulgaria, Romania or Croatia and you use the local currency, also in the VAT amount mentioned on the invoice. That is fraudulent as well. The VAT amount need to be stated on the invoice in euro currency. For private individual there is no invoice obligation, but if you do send an invoice, it needs to be correct.
A mistake on the invoice, you levied too much VAT due to calculation error, in the VAT return you pay the correct amount to the Dutch tax office. That is false as well, as the VAT act states that if you levy an amount , you need to pay that amount to the tax office, regardless.
We can continue with more aspects. The VAT legislation is truly an act on its own.
We think tax-is-exciting, you think VAT is simple charge and claming back 21% VAT. But it is not. There is more to the Value Added Tax rules and regulations you would imagine. We can understand that, hence you need a professional at your side to assist you. We think we are that professional.