C form – non-resident income tax return – ready to file 2021 now!

The C form stands for the non-resident income tax return. This tax return is to be filed by a non-resident tax payer who own property in the Netherlands. We are ready to file this tax return now!

C form

In the Netherlands you become a non-resident tax payer when you are not residing in the Netherlands. You do own property in the Netherlands and for that you need to pay tax.

Tax treaties

Tax treaties determine which country can tax what. In every tax treaty the Netherlands has signed with other countries article 7 determines which coutnry can tax the property. That is the country where the property is situated. For us that is a logical statement. The place the property is located, has the property as a burden on their soil, hence it is taxed.

What is taxed?

Taxed are the properties owned by you on January 1 of the tax year. That implies if you purchased the holiday home during the year 2021, you did not own the property on January 1, 2021. This makes you file for the first time in for the year 2022.

The tax free amount per private individual is EUR 50.000. The value of the property is determined by the city, that is the so called WOZ value. From this value you can deduct a possible debt you took out to purchase the property, or spend on refurbishments of the property.

The tax percentage is roughly 1.4% taken over the WOZ value minus a possible debt. Only the amount exceeding the EUR 50.000 will be taxed. C form ready to file now.

I have no Dutch tax number also referred to as BSN number

In order to be able to file the non-resident tax return you need to have a Dutch BSN number. There are two types of BSN numbers, a domestic one and a non-resident one. You need the latter of the two. Mind you that you do express yourself correctly when you apply for the number, otherwise your worldwide income is taxed in the Netherlands instead of only the Dutch property.

If you have no BSN number or you cannot travel to the Netherlands to obtain one, we will be happy to solve this for you. Can be done remotely.

I have never filed the non resident tax return

In the event you do own the property for a number of years, but you have never filed a Dutch tax return, we can solve that for you. That is for the past 5 tax years. Beyond that contact needs to be made with the Dutch tax office.

Tax is exciting

We think tax is exciting. As always we are excited to file your 2021 non-resident income tax return. We can start instantly. C form ready to file now. Our fee is EUR 390 till July 1, from then onwards our fee is EUR 410 instead. Please reach out to us to get the tax return done.

Entrepreneurs willing to Invest a fortune to save income tax

Difference employment versus self-employed: disability insurance

Entrepreneurs willing to invest a fortune to save income tax is what we come across daily. Is this placing the horse behind the carriage?

Entrepreneurs willing to invest a fortune to save income tax

As the calendar year progresses some entrepreneurs see their profit growing. Initially joy comes across their mind, but if you mingle a lot with native Dutch, the tax impact result could darken your happy thought. Statements like: “you probably pay half to the tax man”. Or “why work so hard if the lot goes to the Government”.

Do I pay too much tax, you think

We have tax brackets in the Netherlands. Officially two, but actually three. The one you do not see is the social premium bracket. The low bracket of the two goes to about 38% income tax. The moment you start to earn a profit exceeding roughly EUR 70.000 you pay over that excess 49,5% income tax.

Before the entrepreneur gets to these taxable profit amounts, the company profit is reduced with tax credits. The entrepreneurs credit, starting entrepreneurs credit and small business credit. Then if the company makes investments and criteria are met, then 28% of these investments also result in an additional credit.

entrepreneur
Entrepreneurs willling to invest a fortune to save income tax

How to reduce the taxable profit even more

This is the question we receive a lot. Then we learn the entrepreneurs willing to invest a fortune to save income tax is the matter. When these investments are necessary for the company anyway, this is perfect. If not, then not.

Example

The company is expanding and a EUR 10.000 desk is required. The desk is purchased on December 1. The entrepreneur that actually needs the desk, purchases the desk. The entrepreneur that not necessarily needs a desk contacts us. “Will my profit be reduced with the investment of EUR 10.000 in a desk”.

Yes it will. The desk is an investment for which in the income tax return an additional 28% over EUR 10.000 can be deducted. The desk being an investment also implies it needs to be depreciated over a 5 year period. From experience I can state the desk has no more value after being used in the office in 5 years time, hence no rest value. That implies a EUR 2.000 depreciation per year. In the year of purchase the deprecation is only for 1 months, as the desk was purchased on December 1. That implies a EUR 167 reduction of the profit.

Entrepreneurs willing to invest a fortune to save income tax

Spending EUR 10.000 in costs only to pay less tax results in EUR 167 lower profit. This is silly if the company does not really need the investment. The investment was only made to reduce tax. If you need an instant reduction of the profit, you should not make investments, but costs. Costs are expenditure less than EUR 450 excluding VAT. These reduce the profit instantly.

If you make EUR 450 costs, the tax you save is either EUR 171 (38% tax rate) or EUR 223 (49,5% tax rate) it is like putting the horse behind the carriage.

Why not aim to pay more tax?

The saving costs to make more profit is a managers philosophy.  We know entrepreneurs as individuals that prefer to spend more on advertising to make more profit. Pay more tax.

Making an investment to create more turnover is not only about paying more tax. Increasing the result implies genuine investments can be made. Investment such as more staff, bigger office, more exposure. That leads to even more result and indeed more tax. The more you earn the more you can spend.

Tax is exciting

We think tax is exciting. We will be excited to explain to you which costs are tax deductible. More exciting is to support you in getting the best out of the entrepreneur to yield a higher result.

Self-employed and employees

Self-employed and employees

The self-employed person is often referred to as ZZP entrepreneur. ZZP stands for working on your own without employees. Why no employees we wonder?

Self-employed and employees

You started your own company. You proudly express that you are the ZZP entrepreneur. But what if you expand, grown your business. Maybe employing a person will actually help your grow the business is a good idea. It is not a brilliant idea, as many companies have walked this road before you.

If you start a conversation in the Netherlands about employing an employee, chance is that within seconds very old slogans are stated. Slogans as “I wish my competitor many employees” . It is a negative slogan as if employees only cause you issues.

The question you need to ask yourself is where you would like to be in a five year period.

Employees make your business grow

In the event that the answer to the question where you will be in a five year period is a health running company, probably employees are part of that picture.

We support you taking steps to employee an employee. Maybe baby steps to start with. Baby steps are for instance to hire a part time person to assist you in your company. That will be a huge learning curve for you. Suddenly you need to make the employee actually work for you. That is not as simple as you might have initially thought it was.  Then again, also not rocket science as it is done before by many companies.

Employees are like human beings

Employees are like human beings, none are alike. They all have human issues. This should not stop you from hiring an employee. You probably have similar issues, being the human being yourself.

The task for the entrepreneur who has now become the employer is to find a way in the activities and the person you employed for the job.

Clients demand continuance of the business

Some entrepreneurs prefer to skip the whole employee part of a company and remain the ZZP entrepreneur. No employees and only subcontractors.

The problem in this case is multiple. At the start of the company this is all ok, but once you achieved a good client base, the client base expects a service from you. If you are on holiday, have the flue, or maybe in quarantine due to Covid, the company needs to be able to perform. That is the difference employees make.

Self-employed and employees

Self-employed and employees:

Being an employer is fun

You have started your company, you took baby steps in employing a staff. Now you have a number of employees, a client base who is happy to work with your employees. That is fun. It is exciting to walk into your own office and see your staff working for you. Besides that, you can also celebrate with your staff if the company is doing well or clients are very pleased with the service the team performed.

What is the first step to take?

We think that making a connection with a labour lawyer is helpful. Express you would like to become a client, request some services like an employment agreement and some basics how best to start with the limited period contract and probation period.

The moment you hire an employee, have the contract signed, the wage tax form, copy of the ID etc. You mark your calendar when you need to inform the employee if the contract will be extended or terminated. Step by step you learn if that employee fits with the company, you learn that in an interview a doubt equals a no. You grow as an entrepreneur and you become an employer.

Tax is Exciting

We think tax is exciting. Self-employment and employees, the payroll processing we are excited about to assist you with. We are eager to assist you with the calculations from a gross salary to a net, or a net to a gross salary. Or the employers costs calculation from gross or net. Our team is ready to assist you with either baby steps, puberty steps or grown up steps in the payroll administration.

The dog ate my bookkeeping excuse

the dog ate my bookkeeping

The dog ate my bookkeeping excuse is often used, and never successful. I tried to feed our dog one piece of bookkeeping, but he refused. Let alone the full bookkeeping

The dog ate my bookkeeping excuse

This is about the entrepreneur who basically cooked the books in his or her advantage, assuming nobody would find out. The Dutch tax office has checks and balances in their system. If one of the checks turns odd, a flag goes up. The result of that flag is a questionnaire send to the entrepreneur.

The entrepreneur is asked by the Dutch tax office to substantiate a couple of claims made in either the entrepreneurs income tax return or Value Added Tax return. Part of cooking the books is that you cannot substantiate anything, as that is the whole point of cooking the books.

The only reply in such situations is that the dog ate my bookkeeping excuse. Which is ofcourse laughingly dismissed by the Dutch tax office.

Heidi, our dog. Eats the couch, my shoes, cat shit. I fet her the first page of our 2021 administration, but she refused.

The dog ate my bookkeeping excuse audit court case

In line of the above the Dutch tax office started an audit with a photographer for the period 2013-2016. We assume the checks and balance raised a flag causing the audit.

The photographer was asked to provide the bookkeeping and he stated he could not. The bookkeeping was stolen from his motor vehicle while parked.

The Dutch tax office can be very practical. He claimed large VAT amounts we assume, for photo equipment. He failed to provide the invoices, so the next question is: how did you afford to pay for the substantial costs? The money was loaned from family and friends and ofcourse there were no loan agreements.

That is not common, but also not that strange. The tax office simply asked to show the equipment purchased with the money loaned from friends and family of the books were stolen from the car. That was a problem. He had been in a divorce and his ex wife has put in the garbage all of his photo equipment.

In court the tax office claimed back EUR 24.981 reclaimed VAT and EUR 2.498 in penalties. The photographer claimed in court that none what had happened to him was his fault at all. Hence the penalty should be erased. The court did not agree with that.

Tax is exciting

We think tax is exciting. I am not too font of taking out the trash, but my wife does see it as my task. In the above court case the wife had put the VAT value of EUR 24.981 with the garbage. That is the 21% of the total costs of the equipment she dragged to the bin. That is EUR 118.957 in photo equipment transported to the garbage. Must have been a very angry woman.

Then the money for these purchases was loaned from friends and family. Maybe it is me, but I do not have such friend. And finally, the bookkeeping was stolen from the car. If all true, it is indeed a very sad situation. Then again, if you spend so much on equipment, you should be able to remember where it was purchased and request for a copy of the invoices. As suggested by the court.

In other words, think twice before you assume you can out clever the Dutch tax office.

Incorrect tax form filed before deadline? – Fine?

A company is a source of income

There are different tax forms to file your annual income tax return with in the Netherlands, what if you file the wrong from? Will you get a penalty?

The incorrect tax form filed – what flavours do we have?

There is a limited number of tax returns tha can be filed in the Netherlands. The most common one is the P(rivate)-form. The tax resident is an employee or was an employee. The W (profit) tax return if the tax resident is an entrepreneur like a freelancer or ZZP. The C (non resident) is for a non resident tax payer that does have a filing obligation in the Netherlands. For instance for property owned in the Netherlands. The M (Migration) form is for a person that either arrived in the Netherlands or left the Netherlands. In other words started or stopped being a Dutch tax resident.  Then we have the F (final) form if the concerning tax resident has died.

A lot to choose from, what if you made the wrong choice?

Filled the incorrect form, what now?

In the Netherlands we have the obligation to file the income tax return before May 1. And if you have not been invited to file and you are aware you need to pay Dutch tax, you are supposed to file the tax return not later than 14 days after May 1.

What if you did your tax return online ticking the incorrect box for the sort of tax return. Like you chose P instead of W or M instead of C. Have you missed the deadline? The tax office would like to think so and will impose a fine of EUR 385 (2021). The court disagreed.

Court case

A former Dutch tax payer moved to Israel. She was asked to file for the year 2017 the  migration income tax return (M form). She was reminded on April 30, 2019. As a result she filed early May 2019 a non-resident income tax return (C form). That is not the correct form. She was reminded again in November 2019. As she had the opinion to have filed the tax return, she did not respond anymore.

The tax office imposed the EUR 369 penalty for not filing in time the income tax return. The lady made a complaint and asked for reimbursement of costs made related to the complaint. The penalty was deleted, but the compensation not granted.

Incorrect tax form filed before deadline? – Fine?

The lady went to the higher court to complain for not getting a compensation. The tax office argued that the tax return was send to the lady to her Israeli address. The tax office could not substantiate to the court if that was in fact the migration income tax return.

The reminders did not show which tax return was supposed to have been filed. The reminders are general reminders, not specific to what is actually expected to be filed.

The court could not rule any different that the lady filed in time a tax return. That implies no penalty for not filing in time could have been issued. The fact that the tax office does not communicate in their reminders what exactly it is the tax office would like you to do, is the risk of the tax office. No penalty for the lady and she is entitled to compensation of costs made.

Tax is exciting

We think tax is exciting. We are excited about this court verdict. Indeed, the tax office sends a random reminder. If the reminded person contacts with us, we need to find out via calls what it is the tax office expects. Even then we something are informed incorrectly about the type of tax return that is expected.

That said, if you know that the Migration income tax return (M form) cannot be done online and the non-resident tax return (C form) can be done online. We understand the lady of the court case did the best she could within the limitations of possibilities. Maybe she could have emailed us to assist her with the reminders, that would have been exciting!

My name is Kelly and I am excited to file your correct tax return to prevent a penalty.

No penalty

Crypto taxed in box 1 or box 3?

Crypto taxed in box 1 or box 3?

Crypto currencies are popular. A question we often get is how will my crypto be taxed? Is crypto taxed in box 1 or box 3? Will I pay capital gain tax on the crypto?

Crypto taxed in box 1 or box 3?

We have a boxing system in the Netherlands to simplify the tax system. Box 1 is for sources of income such as employment, self-employment, freelance. The house that is the main residence is also in this box. It is seen as a source of income, negative income that is. Suddenly the house is fun!

Box 2 is for persons that hold at least 5% of the share capital in a company, or persons who are strongly related to a person that holds at least 5% of the share capital in a company.

Box 3 is for the world wide assets. We tax your world-wide assets, exceeding the threshold of EUR 50.000 a person (2021).

30% ruling holders do not need to worry about Box 2 and Box 3 if their tax return is properly done. Read: have us do your income tax return.

Capital gain tax

First of all, the Netherlands does not know capital gain tax, hence the capital gain will not be taxed in the Netherlands for private individuals.

Crypto taxed in box 1 or box 3?
Crypto taxed in box 1 or box 3?

Box 1 income

Crypto taxed in box 1 if work, effort or knowledge is required to make a profit. What is considered work, effort or knowledge is a grey area. The official line is: when more time is spend on trading than is done for normal asset management. What is normal asset management? The question of this decade. The tax office needs to proof you exceeded normal asset management.

In general, it will be considered work if you spend quite some time trying to get the highest exchange rate possible. Then again, a normal asset manager would do the same. That is the point of being an asset manager.

Box 3 Assets

The normal situation is that your crypto currency is part of your Box 3 assets. In Box 3 you report your worldwide assets like bank accounts, shares, options, property. Crypto is in fact a bank account with a different currency than the EURO currency.

If we replace a crypto by USD and you trade in USD currency, you get a result. If you do that all day and night, it is an effort that makes the result taxed in Box 1.

It is the Dutch tax office that needs to proof your efforts exceed that of normal asset management. If you keep that in mind and you try to act as a normal asset manager, the Crypto is in Box 3.

Box 3 is value is determined per the value per 01-01- relating year, so for 2021 per 01-01-2021. Rough tax rate for 2021 is 1,4%.

Tax is exciting

We think that is exciting. We are excited to assist you with the crypto currency filing in the Dutch income tax return. That said. Each situation is different. Whether your crypto is taxed in box 1. Or is taxed in box 3 is not answered easily without background details. Please reach out to us if you are uncertain how your crypto will be taxed. We would happily explain more about your situation!

Employment versus self-employment?

A company is a source of income

Employment versus self-employment. The Dutch Government supports employment. Sometimes you think you work with an employee who turns out to be self-employed.

Employment versus self-employment

The ever ongoing battle the Dutch tax office has is about being self-employer or not. The Dutch tax office has the opinion that if you have only one client, you are a deemed employee. The Dutch chambers of commerce supports the Dutch tax office and denies a registration if you expect only to have one client. In international situations we disagree with that Chambers of Commerce view. And the tax office does support us, from an international point of view.

Examples employment versus self-employment

Then we have the Dutch situations. A DHL package person rings your doorbell in a full DHL dress code (jacket, cap) and drives a DHL van. So this must be a DHL employee? Indeed, this person is self-employed.

An employee gets a salary, needs to perform labour under instructions and has to do this in person. You would assume the UBER EAT person at your door bringing a delicious meal is an employee. But is not.

The nurse that is planning his or her own agenda, has temporary assignments to very ill persons. A very uncertain period of time, as the person is so ill and can soon die. No instructions are given. The nurse has to decide on the spot based on experience what is the best method. The own car is the transport. Private clothes are the outfit. You would assume this is the example of a self-employed person, but this person is an employee.

The Postnl person must be clear to you. Postnl, the official postage page. Beautiful van stickered with Postnl logo and name. Postnl dress code. Indeed, not an employee, but self-employed. Isn’t that strange? You see Postnl, it behaves as Postnl so you assume this is Postnl employee, and it is not.

Court case

A woman worked for a TV station ‘Omroep Gelderland’. She announced the programs. That implies clear instructions were given what to say, how to say it, when to say it, for which a reimbursement was paid. A clear employee situation you would thing.

Then Omroep Gelderland no longer needed her services and simply stopped paying  her. She went to court claiming that an unlawful dismissal of employment has taken place. She claim continuance of her salary.

The court ruled that no employment agreement was signed. She did not take part in the company, like not attending meetings. The court acknowlegded the fact that all the employee could say on behalf of Omroep Gelderland was monitored by the editorial board. The court ruled she was independent in her work.

No employment was in place, the Omroep Gelderland has followed correct procedure.

Tax is exciting

We think tax is exciting. We can also get excited about straight rules. Clearly on the subject of employment of being self-employed it is not clear at all. Should anyone, like the Chambers of Commerce, state to you that your one client abroad makes you an employee, please contact us. We disagree with that view.

Reduction of wealth tax in Box 2?

Reduction of wealth tax would be a welcome relief for some private individuals, is this possible? Maybe yes.

Reduction of wealth tax

In the Netherlands we have a boxing system, only to make the rules a bit more chewable for private individuals. We have box 1 for income sources like employment, self employment, the home being the main residence is seen as a source of income. The tax rates are 38-49,5% (2021).

Box 1 implies we have Box 2 and in Box 2 are the private individuals that own at least 5% share capital or voting right in a limited liability company. The tax rate is 26,9%.

Finally Box 3 is the most feared box, in this box the world wide assets are taxed. The tax rate is roughly 1,4%

What are world wide assets?

We work with internationals only and sometimes we notice a misunderstanding of what world wide assets are. World wide assets are world wide assets. A question that came up recently was: should we move our cash from abroad to the Netherlands before or after January 1. January 1 is the valuation date of the Box 3 taxation. But world wide assets implies the cash abroad is already supposed to be part of this Box 3 calculation. Hence the question is a little strange. That is caused by misconcept of the Box 3 taxation.

ALL your assets are taxed and a double taxation relief, not a 100% relief I must admit, is provided for property abroad.

I have been taxed all my life already and now again?

That is the common phrase we learn from the old Dutch ladies. They rebel against this Box 3 taxation as they find it unfair. They worked all their life, saved money for the old age as the pension benefits are clearly not enough and now the Government wants to take some of that hard earned money as well.

Internationals are not much different from these old Dutch ladies, as basically they state the identical phrase. Is there a solution?

Reduction of wealth tax in Box 2 via Granny BV

Box 2 opportunities

In the past couple of years notary’s in the Netherlands have been busy in the elderly homes, as Dutch old ladies asked them to visit them and while they enjoy a tea, incorporate a Dutch BV for the old lady. The old lady then deposit as share capital all their assets in the Granny BV. By doing this the money hopped from Box 3 to Box 2. No more Box 3 taxation.

What is the consequence of hopping to Box 2?

In Box 2 the tax rate is 26,9% (2021) and that is charged over dividend income and capital gains made with the sale of shares. Repayment of the share capital itself, is not a taxable event.

That implies the amount of cash paid for the shares is sitting in the BV bank account. If a profit is made it is taxed. As long as no profit is realized, it is not taxed.

How to pay the share capital if your assets are invested?

Let us assume you are a wealthy man or woman and your assets are stuck in a share portfolio. The notary incorporates a BV company. Ask the notary to accept as payment of the share capital the transfer of the portfolio. Then you do not need to sell your portfolio, but you transfer the portfolio.

What to do with the cash in the BV?

The cash in the BV can be used in the same manner as before. Only a realized capital gain in investments is actually taxed with corporate income tax. A payment to yourself is a dividend payment taxed at 26,9%, unless this payment is a repayment of capital. That is tax free.

You can even invest in other companies, and proceeds received from those other companies are under the participation exemption. That implies, not tax is charged until you pay yourself.

Swapping back to Box 3?

The moment it is time for you to use your cash, you liquidate the BV, have the capital paid out to you. The share capital is paid back to you tax free. The premium generated is taxed at 26,9% Box 2 tax.

However, if for some reason you return back to Box 3 too soon. Too soon is a couple of months’ time, the tax office will disregard the box hop to Box 2 at all. We also have the opinion that the set up costs, maintenance costs and liquidation costs are part of a long term engagement.

Tax is Exciting

We think tax is exciting. Some think it is exciting to challenge the system. We will be glad to assist, as long as we stay on the correct side of the rules and regulations. The financial advice question if this is a good move for you, that we cannot answer. We know about tax, not what is financially best for you.

simplified ABC transactions in the EU

ABC transactions

This is an simplified ABC transactions story that is not that simple. How to treat the VAT when the factory supplies the ultimate client directly, passing by the middle man.

Simplified ABC transactions

The simplified ABC transactions stands for the following situation. You sold goods to a client. This product is not created by yourself. You purchase the product from a factory or wholesaler. This factory or wholesaler offers to send the goods directly to your client. This is convenient and challenging from a VAT (Value Added Tax) point of view.

Example:

You sell car wheels in the Netherlands, manufactured in Poland. Suddenly you receive a large order from Portugal for about 200 wheels. The Polish manufacturer offers to send them directly to Portugal.

The invoice flow goes from Poland to the Netherlands and the Netherlands invoices Portugal. The 0% VAT rate only applies when the administration carries documents of the goods actually being transported to the other country. That document the Dutch seller does not have, as the goods never arrived in the Netherlands. Let alone were transported to Portugal from the Netherlands.

Can 0% VAT be applied by the Dutch seller who has not transported the goods?

The ABC VAT transaction rules do provide the 0% VAT rate, even though no goods were shipped by the middle man (letter B).

How do you process this transaction?

Following the example, the Dutch seller will receive an invoice from the Polish manufacturer with 0% VAT. The 0% purchase you report in your Dutch VAT return as a regular 21% purchase from within the EU. Then in the same form you claim 21% reclaimable VAT for this purchase. That makes the transaction from Poland is on a zero VAT level.

The sale from the Netherlands to Portugal is a so called ICP transaction for you. The condition is you state the valid EU VAT ID of the Portuguese company on your invoice. And you meet all other VAT invoice requirements. Then you can charge 0% VAT on this invoice to Portugal.

Conditions for applying the scheme

If you apply the simplified ABC scheme, you have fewer obligations. No need to register in your customer’s country if you are the intermediary company B for the ABC deliveries within the EU. The following conditions need to be met:

– You can prove that you bought the goods from company A with the aim of selling them on to company C. You can prove this, for example, with a contract or a quote.
– There are 3 companies that each have a VAT identification number in a different EU country.
– You make an agreement with company A about the transport of the goods.
– Goods go from company A directly to company C in company C’s country.
– You are not registered in the country of company C.
– You include your delivery within Europe to company C in your VAT return and ICP form.

Difference simplified ABC delivery compared to a regular ABC transaction

The transport in this non simplified ABC transaction is crucial. When you perform a non-simplified ABC invoice flow and for some reason the goods were directly shipped from A to C, then this will have significant issues for B in the process. The 0% VAT reported in the example in Portugal is only possible when there are shipping documents in name of B.

The registration in country C is also an inconvenience. This is solved in the simplified ABC transaction. However, if you are already registered in the C country, Portugal in the example. Then you cannot apply the simplified ABC transaction scheme.

Additional requirements for your invoice

If you are the intermediary company B for an ABC delivery, when applying the simplified ABC scheme, in addition to the normal requirements for an invoice, you must state the following additional information on your sales invoice to company C:
1) Your own VAT identification number.
2) Company C’s VAT identification number in the country where Company C is located.
3) The statement ‘reverse charge, simplified ABC scheme’ on the sales invoice to company C.

With this you inform customer C that he must declare the VAT, because you used the simplified ABC scheme.

Tax is exciting

We think tax is exciting. My name is Anthony and I am part of the accounting team within the company. My interest is with Value Added Tax returns and its challenges. Feel free to contact me at anthony@orangetax.nl for questions you might have about VAT transaction in the European Union.

A non-resident BSN number request, how is that done?

non resident

You live abroad, you would like to purchase a Dutch property. Or you already own a Dutch property for which you need to file a Dutch tax return. How to get the non-resident BSN number in the first place to file this return?

A non-resident BSN number request

You would have to request a Dutch tax number, also known as Burger Service Nummer or BSN. In order to do so, you would have to come to the Netherlands and register in the BRP (Basis Registratie Persoonsgegevens) as non-resident. However, many issues occur, especially now with COVID-19.

Incorrect registration

One thing that can go wrong, is an incorrect registration. The Dutch tax number can be obtained by city hall. City hall issues resident tax payer BSN numbers. If you are not aware and they ask your details and Dutch address, you might assume the city wants to learn the address of your Dutch property. That is not the question, the question is your address. If you give your address, that is abroad, the city hall person will know you need a different procedure.

Should you have misunderstood and you provide your Dutch property address details as your address details, you are at the spot registered as a Dutch resident tax payer. That implies you need to report your world wide income and assets in the Netherlands. But clearly, you are not a resident, you are a non-resident.

Still, you not being a tax accountant might not see the issue on hand yet. You walk out, leave the Netherlands, and while you left, tax messages arrive on your Dutch property address. You might be a nice landlord, or not a nice landlord, regardless, the tenant often does not feel obliged to update you. The moment you are aware you have issues, is the moment the Dutch tax office seizes your Dutch bank account, because you have not paid outstanding ex officio assessments.

Expenses

Besides incorrect registration, it can also be very expensive to come to the Netherlands, only to obtain a BSN. Having to travel to the Netherlands, most likely having to spend the night in a hotel, it all adds up very quickly. Can it be cheaper? Yes it can, if we assist you.

Solution

Correct, many issues, but one solution. Have us request the non-resident BSN number for you!

We require the following details:
– Full name
– Date of birth
– Full address
– Certificate of residency

With these details, we are able to request a non-resident BSN number on your behalf! Our fee to do so is EUR 100, including VAT.

We are excited to assist you already!

My name is Kelly and I think  tax is exciting!

non-resident BSN number

Correction VAT return is obligatory

Correction VAT return or in Dutch: Suppletie aangifte BTW is an obligation. The obligation occurs when not the correct amount of VAT has been reported for a year.

Correction VAT return

The Value Added Tax (VAT) system is a closed circuit. The VAT is in the end paid by the private consumer or the company not being a VAT entrepreneur.

Example. You charge EUR 100 plus EUR 21 VAT to a client. That client is a company and receives your EUR 121 invoice. You need to pay EUR 21 to the Dutch tax office, your client claims from the Dutch tax office EUR 21. In the end you earned EUR 100, the client paid EUR 100 and the tax office had a neutral transaction.

This example shows the importance from the tax office perspective for everybody to report correctly the VAT. To help companies filing the correct VAT return, penalties have been put in place.

VAT audit - court case
VAT audit – court case

Update VAT return

Officially if you file a quarterly VAT return and you report an item in the wrong quarter, that is already a correction you need to make. Practically within the calendar year you can make this correction in the next quarter. During an audit the Dutch tax office will not share this view, but will work with the solution.

Correction made in a previous year, needs to be made in the previous year. That is done by separate request.

The tax office has the opinion that if a company never makes a correction, the bookkeeping is probably not correct, as human beings are in charge of the bookkeeping.

Court case

A company had received an audit from the Dutch tax office. The conclusion was that a 50% penalty was issued for the year 2014 and for the year 2015. The amounts are EUR 7.200 and EUR 12.800 in penalties.

The company argued these penalties as they send a VAT correction by post to the Dutch tax office. Apparently that never arrived. The tax office argued that a deliberate mistake in the books were created, hence the fines.

The court ruled that a deliberate mistake is only one that can be proven. And as the company claims it has send the corrections, there is no proof of deliberate mistake. The penalties were erased, but the court did state the company should have followed up on their corrections themselves.

Tax is exciting

We think tax is exciting. Penalties are never exciting. We also use postal services for communications with the Dutch tax office. Our experience is that so often our mail ‘does not arrive’, so we now use registered mail for most postal messages. Either the postal service level has dropped this dramatically or the Covid work method with the Dutch tax office makes mail is ill received.

In this case I wonder if the audit was a true random audit or a result of very late received messages by mail. Sometimes we receive the quarterly bookkeeping send by mail a full quarter later. So we switched to full digital.

That the company did not chase their own VAT corrections we can also understand. If you learn you paid not enough VAT, you update the Dutch tax office and the Dutch tax office decides not to act on that. Why insist on that. The fact that your message never reached the Dutch tax office was not taken into account.

Entrepreneurs deduction (zelfstandigen aftrek)
Cooking the books, but not VAT!

Family loan

family loan

The family loan is a possibility in Dutch rules and regulations. Could this be more favourable?

Family loan

A loan is a loan, whether between you and a bank or you and your family. A loan is an:

– agreement to loan an amount,
– for which interest is charged and
– a repayment schedule is in place. If one of these criteria is missing, it is not a loan, but for instance capital.

Interest

A normal interest percentage needs to be set. What is normal depends on what interest percentage a bank would have charged under the same conditions. The problem in this case is that often the family is taken out, as the bank is not willing to loan, let alone provide an offer with an interest percentage.

The court has ruled that family do not need to make the same profit as a commercial bank. That implies the normal interest can be to a lower percentage.

The interest can also be a higher rate. The tax office will then investigate what is the reason for this higher interest. A reason could be that no collateral is provided.

The interest of a loan taken out for the purchase of a home is only tax deductible, if the repayment period of the loan does not exceed 30 years.

Family loan

Court case

In 2018 a family loaned against 9% interest for a house. The tax office argued that the 9% was too high. The correct interest percentage was 4,5%. The tax office won this case.

The nasty aspect of this case was not addressed by the court, but later by the minister of finance. The 9% interest was part of an annuity that would pay back the full amount in 30 years time. By dismissing the 9% as too high, the correct percentage was now 4,5%.

You would imagine that less interest implies more repayment. That is not the case. 4,5% interest was dismissed from the annuity and the result was that not enough was paid back over a 30 year period to repay the full loan. The consequence of this lower interest verdict is no only less interest deductible. The consequence can be that no interest is deductible at all, as the loan no longer meets the 30 year repayment condition.

The solution in such agreements is to put in a condition that if the interest percentage is not accepted by the tax office, the balance between the accepted interest and agreed upon interest is to regarded an additional repayment of the loan.

Why a family loan?

Doing business with your family is only fuel for the traditional family fights. Then again, if the bank keeps on reducing the amount you can keep in your bank account penalty free. The stock exchange might be at the top already. Slick investment sellers are a risk on their own. Why not leant your family?

To avoid unnecessary risks of not being repaid, a mortgage can be put on the house by you. Then there is nearly no risk for you.

Tax is exciting

We think tax is exciting. Loaning money is not our business. Taking into account in the tax return the interest deduction (box 1) or the loan receivable (box 3) is our business. Hence we touched the subject of a family loan. It is possible, at slightly better conditions than a bank offers. Do not get too creative, as the tax office is on the lookout for too generous loans or strange conditions.