A Dutch person thought it was a good idea to claim back the VAT on the Porsche Cayenne purchased. Claiming back a substantial amount of VAT while not making any turnover, makes the Dutch tax office do an audit. Obviously.
A person or company is a VAT entrepreneur when services are performed or goods sold. This is regardless if the person or company is registered as a VAT entrepreneur. By the fact that a person or company takes part in the economic traffic as has been done, makes them a VAT entrepreneur.
Hong Kong Trade case – EU jurisprudence
The Hong Kong Trade case is about a person that regularly performs services. All services performed, have been performed for free. No reimbursement was received. The EU court ruled that in such a situation this person is not a VAT entrepreneur.
Claiming back VAT and Porsche Cayenne
A husband claimed back the VAT on a Porsche Cayenne he purchased in 2016. As this person had no turnover, the Dutch tax office audited the bookkeeping.
During the audit it showed that the company was in fact not doing anything. The husband claimed to work for the company of his wife. His wife purchased cars, restored them and sold them. Without the technical skills of the husband, the wife was not able to operate this company.
The husband was not part of the company of his wife, nor did he invoice her for the time spend on her company.
The tax office came to the conclusion, based on the Hong Kong Trade case, the husband was not a Value Added Tax entrepreneur. The claimed VAT was to be paid back.
In the above court case the VAT was claimed for a Porsche purchased in 2016. The court, regular court, not even appeal court, ruled on June 28, 2021 this case. A message for who think they are more clever than the system, it can take 5 years to come to closure.
5 years during which the husband had to have an audit, answer question provide documents. Receive an assessment to pay back and go to court. This all costs time and consultancy fees of the experts.
Then the decision is that he was not entitled to the VAT amount of the Porsche Cayenne. I can only assume a substantial VAT amount. Even though we, the normal peasants, receive no interest on our bank accounts. The husband is to pay the Dutch tax office interest for the period the amount was wrongly paid out to him.
Test the water
The moment you are about to do something, of which most people think it is strange. You might want to test the water with the experts before you dive in.
Tax is Exciting
We think tax is exciting. About strange situations we are not excited. We have the opinion that a reasonable thinking entrepreneur will not only provide services for free.
Who would perform a service for free? A person that is a related person. Related in this case to the wife, but in other cased related as a shareholder or participant. Think objectively and I like you to think of me in such cases. Would you work for me the full year for free (I would like that!). The only answer I have heard during my career is NO. Maybe that has to do with my social skills. Or due to the fact that it is strange to work for free.
And then the time frame. You can think of something clever, but many years later, when you are fed up entirely about the issue, the tax office will continue. Maybe a regular plain manner of doing the books wins over time the more flamboyant cooking of the books.