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.

One man company bookkeeping

One man company bookkeeping

The one man company bookkeeping is not much different than other bookkeeping. Balance needs to balance. That said, there are some differences.

One man company bookkeeping

The one man company bookkeeping is the bookkeeping of a company. The one man company equals a ZZP company or freelance company. The Dutch tax office can demand to have access in a two week period to the entire bookkeeping. This implies, the bookkeeping needs to be accessible at all times and understandable.

Bookkeeping is bookkeeping

Bookkeeping is bookkeeping which implies the balance needs to balance and the profit and loss account shows the result. This is not different from the bookkeeping of a Dutch BV company or UK ltd company.

One man company bookkeeping
One man company bookkeeping

What makes the one man company bookkeeping different?

The one man or one woman makes the bookkeeping different. The Dutch tax office only accpts invoices in name of the Dutch BV. With the one man company the person owning the company can be invoiced or this person can be invoiced in the company name. Both invoices are accepted as costs for the company.

With a Dutch BV company the bank account that only can be used, is the bank account in name of the BV company. With the one man company a personal bank account can be used as well. Not ideal, but possible.

With a Dutch BV company an annual report needs to be created that needs to be published after the shareholders meeting agreed with the annual report. With the one man company no separate document as annual report is required. Using the opportunities in the income tax return to provide a balance and profit and loss are sufficient.

Are these true differences?

Depends who you ask, but these are true differences. The one man company bookkeeping is less formal. This is not the same as less important. The result needs to be correctly reported in the income tax return.

The less formal part makes your life as entrepreneur easier.

Bank account

The bank account we like to address. Indeed, you can use your personal bank account for the one man company, but we do not recommend that. The Dutch tax office needs to be able to easy access your bookkeeping and we need to facilitate this. If we are then confronted with all your private spending of which sometimes this could be too much information.

The personal bank account can only be in your personal name (initials and last name), the business bank account can be in your company name. This is more professional. Indeed, the bank charges are higher.

Tax wise a difference in accounting?

Tax wise there is no difference in the accounting principles for the one man company or for the BV company. The BV company use the identical rules and regulations.

Tax is exciting

We think tax is exciting. We also are excited about less formal rules for the one man company bookkeeping. It does happen that sometimes you pay an invoice addressed to you personally, not in the business name. Sometimes you pay business costs from your personal account instead of business account. This has no impact, also not if the other way around.

New VAT rules as per July 1, 2021 in the EU

Entrepreneur leaving the Netherlands

Tax is a super exciting subject and the Governments around the world keep excitement up by constantly changing the rules. They have done it again, now inside the EU.

What are the new VAT rules as per July 1 about?

The new VAT rules are about you selling goods to private individuals outside the Netherlands, inside the EU. If this does not apply to you, this article is not for you. If you provide services to private individuals, nothing will change for you.

Situation till July 1, 2021

Right now there is a per country method. This implies you have to exceed a certain amount of sales before you are obliged to charge the VAT rate of this particular country. The limit amount varies per European country.

The moment you exceed the threshold or limit you are obliged to register your company for Value Added Tax purposes in that country. Then you need to comply with the local VAT requirements to fulfill your obligation. Feels very old, it is old.

Sales exceeding EUR 10.000

From July 1, 2021 the system will change. If you sell in the entire European Union outside the Netherlands for more than EUR 10.000 in turnover, you need to charge the local EU country Value Added Tax rate.

On top of that you need to assure yourself you charge the correct VAT rate. Some countries have three rates. You need to apply the correct invoice requirements as you are now obliged to issue the private individual with an invoice. We do have EU set invoice requirements, but some EU country still have specific alterations.

How to file your VAT return in the EU?

The main rule is that you need to register your company in every EU country where you are charging the applicable VAT rate. The VAT you charge you need to pay to that specific EU country.

Governments understand that in this time and age this is not a very progressive situation. Hence in the EU it has been decided to introduce the One Stop Shop or OSS. The OSS is a system where you announce yourself to the tax office in the EU country where your company is registered, with the desire to file pan EU VAT return. This EU country will then distribute your one payment among the other EU countries.

The Dutch tax office has opposed this system as the Dutch tax system is not ready for the OSS. The tax office have stated that they can currently handle max 30.000 companies. It is key to get your OSS activated quickly to be part of the first group of 30.000 companies.

How to create one stop VAT facility for EU sales to private individuals under new VAT rules?

If you have a one man company and your digital ID, log on with your digital ID. If you have a so called E3 certificate to communicate with the Government, log on with your E3 details. Then you go to the Dutch tax office and the ‘EU-btw-eenloketsystem’ and there you can register your company.

One of the conditions of the one stop shop VAT filing is that you have terminated your VAT registrations in the EU countries as per July 1 next.

Tax is exciting

We think tax is exciting. The EU Governments are excited about collecting the VAT they should have received already much earlier for sales to private individuals in their country. We understand this need and we are glad to learn made use of the EU collective to create the OSS. If you needs assistance with our EU sales or with your Dutch domestic VAT obligations, feel free to contact us.

Community service for not cooperating tax audit

Gift tax in marriage?

If you are convicted for community service due not cooperating with the tax audit, we understand you think tax is not exciting.

Tax audit

A tax audit is simply an audit by the tax office to see if what you reported in VAT, turnover and costs was indeed correct. Certain articles in the general tax regulations determine what the tax office can expect from an entrepreneur.

The tax office can ask for information about the bookkeeping and then in a reasonable time the bookkeeping needs to be presented. A reasonable period of time is two weeks.

Tax audit – court case

In this court case a director and single shareholder of two BV companies was audited. This director deliberately frustrated the audit.

His tactic was to blame it on Covid19 that he could not cooperate with the audit. Then when a meeting could be made, he agreed on the meeting, to cancel the meeting and not reply to rescheduling the meeting. That trick he repeated over and over again.

Community service for not cooperating tax audit
Community service for not cooperating tax audit

The Dutch tax office also has its limits in understanding the situation of a tax payer and that limit was clearly reached. As this person was the active director and the only person involved in both BV  companies accounts, he was convicted to 80 hours community service.

Tax audit – court case – una via

Una via implies that you can only be convicted one time for your crime. In this case the director shareholder had reported in the years 2012 and 2013 EUR 196.742 less VAT than he should have done. The court convicted this person for 2 months in jail and 240 hours community service.

The director shareholder challenged this verdict as he stated to have been punished already. He was charged by the tax office for EUR 196.742 plus interest. The court explained that he was not punished twice. The EUR 196.742 plus interest was the amount he paid in VAT too short. That is not a punishment, but a simple VAT obligation.

Here he made a thinking error or you could say the VAT department is very clever. He would have been right if on top of this EUR 196.742 a 50% or 100% penalty was put in place. Then he was convicted indeed twice. But that the VAT department does not do, as they are keen to go to court to demand jail time or community service.

Tax is exciting

Tax is exciting, an audit never is. Of course you do your best to comply with all the rules and regulation, but sometimes you miss something. If that is the case and that turns up during the audit, the tax office can act as a human being. They do understand you can make a small mistake and they will state in their audit report that these mistakes need to be addressed for the future.

However, not reporting EUR 196.742 VAT is serious VAT fraud that certainly is not a mistake. If the party to whom the invoices were send can reclaim this EUR 196.742 VAT from the tax office, it is a serious crime. That is also the reason why the tax office hits hard with legal actions in case of VAT fraud.

Business bank account – do I need one?

Difference employment versus self-employed: disability insurance

Business bank account, do I need one we are asked a lot. Yes and no, depends on the type of company and on your desires.

One man company or zzp company

A so called one man company or zzp company or freelance company or eenmanszaak is a transparent company. Hence you and your company are one. No so nice in case of a liability claim. With respect to the business bank account it is not required to have one.

Despite what the bank tells you, the Chamber of Commerce tells you or anybody else, you do not require a business bank account. You can use your own personal bank account.

The question is more:

Do you want your private bank account to be used for the business?

We think not.

The advantage of the business bank account is that your can have the account in the name of the company. We think that is professional. Then again, if your personal name is the company name, there is not difference. If the latter is the case, cheapest is to set up another personal account and trade with that.

Another aspect is the accountant. We process your bookkeeping and if we then have to go through your full grocery purchases, holiday spending, rent payments, insurance payments to get to the company details, we spend a lot of time. That time we invoice you. So you are not amused by us charging you more, neither will you not be amused by us  not recognizing some of the insurances to be business insurance, or some of the travel costs not being your holiday.

Finally, we are accountants and have eyes. It has happened that a female former client used her personal bank account so we noticed she purchased condoms, had a wax job, paid for dinner and we noticed something of a hotel. That is for us too much information, as is lingerie or certain toys you purchase for whatever reason.

BV company

A BV company is very much different from the aforementioned one man company. This vehicle is a closed circuit from which payments can be received as salary, dividend or a loan. Using your personal bank account for the business will have serious issues.

The Dutch tax office will take the standpoint that all earnings received in your personal bank account is in fact net salary. A bigger problem we cannot imagine in this situation.

Therefore the BV company needs to have its business bank account. The most important reason is to show the share capital was actually deposited, which activates the limited liability. Why else would you have the BV company.

The bank account itself

The setting up with a bank is a topic for our clients. Our clients do not discuss if they want a business bank account, the issue is, can they have a bank account. If you set up a Dutch BV company with foreign shareholders, there is no Dutch bank that opens a Dutch bank account for you. That is a problem.

Of course we have many clients that were able to set up their Dutch a bank account. We have not yet been able to get our finger behind why some can and some cannot. The policy of the Dutch national bank is not to open a business bank account for a Dutch BV company with foreign shareholders. That said, like some of my favourite clients mentioned: unless your name is Google, Apple or Coca Cola, then of course a business bank account is opened instantly.

The problem with not being able to open the business bank account is the deposit of the share capital. Then again, the rules do not insist on the bank account being a Dutch business bank account. The bank account needs to be owned by and in the name of the BV company. Can be any bank worldwide, that can be used.

Tax is exciting

Tax is exciting, banking is…another trade. A company cannot do without one, or can we? Maybe in the near future the coin platforms develop in an accepted payment method. Just like less than 10 years ago online shopping was regarded dangerous.

DAFT and IND

One man company – our quote

DAFT and IND is about the Dutch American Friendship treaty and the Dutch immigration service. How is this connected?

DAFT and IND

The Dutch American Friendship treaty or DAFT makes it for US nationals more easy to get a residence permit in the Netherlands. The setup is unique. With other countries such a setup does not exist.

For the correct procedure we refer you to a specialized immigration lawyer. Often the procedure involves the incorporation of a Dutch company. A company is as simple as a one man company. Or sole proprietor company. Or ZZP company. Different names for the same type of transparent company.

Statement by registered tax advisor for DAFT and IND

Part of the procedure to get a residence visa is a statement about the financial status of the new setup company. The statement is about the liquidity of the company. Such a statement can be drawn by a certified auditor or a registered tax advisor.

We at Tax is Exciting are registered tax advisors. Not certified auditors. That implies we are authorized to assist in the procedure for the DAFT application.

Currently, in the year 2021, our fee for the assistance is EUR 100 plus VAT.

Tax is Exciting Covid cartoon
DAFT and IND

DAFT statement

The EUR 100 plus VAT fee is to tease the DAFT applicant to become a client.. We hope by offering a floorless service that this DAFT application maybe becomes a client for the full company.

A ZZP transparent company requires bookkeeping to be done. On basis of that four quarterly VAT returns are filed. Annaully the entrepreneurs income tax return is processed including a possible tax partner. The annual rate for this total service is EUR 1.350 plus VAT in the year 2021. Feel free to contact us.

Tax-is-Exciting

We think Tax-is-Exciting. The DAFT treaty is based on an over 400 year relationship that creates possibilities. We will be glad to contribute to a swift application process of the Dutch residence visa under the DAFT.

Year-end bookkeeping

Now it is mid-December and soon the year end bookkeeping is to be done. What does this imply for you the entrepreneur?

Year-end bookkeeping

The calendar year equals the fiscal year. That implies soon you need to have provided your full 2020 bookkeeping to your accountant. What does this imply?

That implies you need to provide the full bookkeeping. Silly answer, but often we encounter half way the next year that an entrepreneur recovered from the glove box compartment in the car a bunch of cash paid receipts he or she forgot to provide.

Or our accountant asked for the invoices paid from the business bank account, to see the content and VAT amount. For some reason, even after asking several times, none is provided. But suddenly found months later.

What to do with too late provided receipts?

The consequence of not providing receipts is that these costs are not deducted in the books. The individual receipt is not so high, but the total could be a couple of hundred euro deduction.

The thing is, the VAT return is already filed and the income tax return. If the entrepreneur wants us to file the VAT correction and the income tax return correction, the costs related to these services equal or exceed the deduction of the costs.

Moreover, refiling tax returns, done basically every year, could show the tax office computer that the entrepreneur is not on top of his administration. This could imply an audit to check if turnover was not forgotten to be reported as well.

Year-end bookkeeping
Year-end bookkeeping

Year-end bookkeeping, be on top of your accounts

The year end is December 31st, make sure you have your accounts complete and please provide them in time to your accountant.

When to invoice turnover/hours you spend during this financial year

Every month you are accustomed to invoice your services the next month. Very practical, but not for the month of December. The rule is that turnover needs to be reported in the year that the turnover was generated. That implies you need to invoice with a date in December, the December turnover/ hours you made. You cannot invoice the previous year (2020) turnover early next year (2021).

Reporting the turnover in the incorrect year is during an audit an issue. An issue you might not see instantly, as in your view you reported the income. The issue is in the overall result of the company. By reporting the December income in January of the next year you influence the total result, which could create tax credits for you, you might not have been entitled to if all the turnover was reported in the correct year.

Tax-is-exciting

We think tax-is-exciting and our Max thinks accounting is very much exciting as well. Max has the job with his team to file the Value Added Tax returns for the last quarter of 2020 in time with the tax office.

The last quarter VAT return implies that VAT corrections for private spending, VAT corrections for company car use and other corrections need to be made. Max is very much excited to process this for you.

Future proof your business software

Get more out of your existing business software by transforming it into a modular platform.

Improve your existing software with modules

Medium-sized companies often face the dilemma of either accepting software limitations or undergoing  a long and expensive upgrade procedure. Not anymore. Consolica.com transforms your software into a platform and adds what you want as a new module. This can be as simple as a database connection to avoid entering data twice or as impressive as a virtual call centre that lets your employees work from home. You just add a new module to your existing software.

Future proof your business software

Your contact person in Amsterdam

While the software is developed in Russia which offers an excellent quality to price ratio you have your contact right here in Western Europe. Peter Bohren is a Swiss citizen who  understands the challenges of modern business world having started a successful transport business of his own in Moscow. He has long lived in the Netherlands and been a client of Orange Tax almost since the beginning. He can analyse your business processes and technical systems and deal with the software developers for you.

Peter Bohren

Convert your software into a modular platform

Using service oriented architecture principals yours existing software is the basis for a new modular platform. This approach enables you to add the features you want while your employees continue to use the existing system. Your new software has several advantages. It is:

  • Customized: you can add the extra features to your existing system that you need.
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  • Cost effective: no need for expensive upgrades, you just add what you want to use.

Visit consolica.com for the range of services we offer.

False invoices and VAT

income tax

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.

False invoices and VAT

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.

Tax-is-exciting

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.

Introduction: our Exact online & VAT specialist: Max

I would like to use the opportunity to introduce our Exact online & VAT specialist Max. Max is a young professional who gets excited about having your balance actually in balance.

Exact online & VAT

Last year we updated the way we processed the books. It was done till then in a rather old fashioned bookkeeping program with a type of dinosaur name. Which of course fits the bill as bookkeeping has not changed since before ice age started. A balance needs to be in balance, and the profit and loss needs to connect to the change in the balance.

However, institutes and people have changed. The institute named the Tax Office is about to change, but naturally Covid19 has slowed down the pace.

Exact online & VAT: changes of the tax office

The tax office uses a portal where you as entrepreneur can log on with a username and a password, which is not your digital ID, to file your VAT return. Then if you log on you see the form that basically is a digital version of the paper form we have had for decades.

If you pay attention, you see the tax office referring to this manner of filing your VAT details as the old fashioned manner. “naar het oude portaal” (to the old portal). When something is old, there must be something new.

The new method will be abandoning the old portal and either you file via a E3 certificate to communicate with the Government, or you file via your bookkeeping software. This is not a simple change in way of filing, no, the tax office wants you to provide your full bookkeeping for that period of time. That is much different than simply filing a form, where it is possible you are tempted to complete it more in line with your cash base. That is ofcourse illegal, but it does happen.

Why would the tax office like you to file your full bookkeeping? Simple answer, they want to check if what you provide as VAT details is indeed correct. Moreover, they want to see what will be your forecast profit wise. Based on that forecast the tax office will already impose a preliminary tax assessment. This already happens, but again up to the desire of the entrepreneur how to complete this forecast. This will change to the tax office making the calculations themselves.

This is not only a hunger for money, but also a protection of you the entrepreneur to be able to pay the tax before it might have been spend already.

Exact online & VAT. Max is ready to assist you

Exact online & VAT: changes of the entrepreneurs

Not only the tax office is changing its manner of operating, also the people change their manner of living. Printing a bank statement and putting it in a folder feels like the 80’s of the last century. Who does that? Well I do J , as I am at an age that I still expect the server to crash. I am then still able to provide the books upon request of the tax office.

Most entrepreneurs like the bank statements to be uploaded in the accounting system automatically and to have the invoices be processed likewise. Exact online offers exact-ly this option of you taking a picture of the invoice and this invoice then arrives in the system where Max can process that.

Still the entrepreneur needs to keep the invoice 7 years on file. Some think that uploading is enough, hence no longer necessary to keep the original invoice. That is not correct. The invoices are uploaded in PDF format. PDF is open to changes. Changes in date, name of the invoice etc are possible. That the tax office finds undesirable, hence the original could be asked for.

Exact online & VAT: Max

Max is young, Max loves to work with exact online and Max is very much excited about our clients either using the Exact online software or to teach them how to optimize the use of Exact online software.

For instance, you have an actual shop with a cash registrar. Before you purchase a cash registrar or when you think it is time to replace one, contact Max to see which one is able to connect with Exact online. That makes the life of the entrepreneur much more relaxed, as at the end of the day no more extracts from the cash registrar needs to be kept on file.

Or you work online and use portals such as Mollie who collect in your name the payments. Exact online can make a connection to this Mollie system and book the turnover automatically.

If you have a question about optimizing your books in Exact online, contact Max. Max@orangetax.nl

Tax-is-exciting

We think tax-is-exciting. Sometimes before a proper tax return can be filed, books need to be processed. This is often done in the VAT quarter months of January, April, July and October. In the old fashioned ice age way that meant a lot of work to be done in these months. The new exact online Max way implies the books can be done every week. In the VAT filing month it is simple checking and filing the VAT return. That can even make our clients become excited.

Sorry for the dashes in the middle of the word tax-is-exciting. Apparently Google has a dirty mind and sees only a three letter word that we refer to when we practice to reproduce ourselves. Anything related to that word is spam, hence this devout solution.

Tax and bookkeeping – so exciting

The Tax and bookkeeping go hand in hand. The reporting of the Value Added Tax will soon change, what will that change imply?

Tax and bookkeeping – Value Added Tax filing

The Value Added Tax (VAT) filing is right now a form where you complete the details without proving these details are indeed correct. That will soon change into a filing where you not only provide the VA T form, but also upload a part of the bookkeeping that should reflect the VAT position.

The aim of the Dutch tax office is to get more control over the VAT reporting. But also to be up to date of the  result of the company. If the report shows a positive result, we expect the tax office to invite you to pay already the income tax or corporate tax over this profit.

Regardless, at the end of the year four quarterly reports make one annual report. Hence no need to make the entrepreneur income tax return or corporate income tax return, as the tax office will make the tax return for you.

Tax and bookkeeping – so exciting
Tax and bookkeeping – so exciting

Tax and bookkeeping – the tax trouble shooter

We think that progress is good, however, the system should remain open for making amendments. For instance, should the tax office see a profit on the horizon and send you already a preliminary assessment for the amount, it is not said you will in the end make a profit.

Before the end of the year we often bring the salary of the director in line with legislation or tax optimal amount, which could imply the profit is fully consumed. If during the year you have already been asked to pay the corporate tax over the profit that is not there, you can run into a liquidity problem.

For those kind of situations you need a tax trouble shooter and we think we can offer you this service.

Orange Tax Services – tax is exciting

Uploading the bookkeeping to the Dutch tax office is the future, a not too far away future. In order to be able to meet such a demand, it is good now already to make decisions to make future reporting easier. We have the opinion that using Exact Online accounting software is future proof software.

We also think that you, the entrepreneur, should not act as bookkeeper when you are not. Hence we are eager to assist you with your accounts in Exact online software in such a manner that we take care of the bookkeeping while you are earning your income with something you are good at.

Corporate tax: rent privately owned office to your company

Creativity in tax is a joy the Dutch know very well, hence we get all kind of suggestions how to avoid paying too much tax. Often lack of knowledge of the fiscal legislation makes that suggestions simply cannot be executed as it is forbidden. Sometimes it is possible, but is it worth while pursuing?

Rent privately owned office to your company

You are the managing direct and 100% shareholder of your BV company, or for that matter your UK Ltd company registered in the Netherlands, or your US Inc. registered in the Netherlands as you are living in the Netherlands.

You have understood that, as you earn at least 90% of the turnover of the company, your salary cannot be less than 75% of the profit, or at least EUR 45.000. At the same time you have learned the hard way that we do have a 52% maximum tax rate. Even if you have the 30% ruling, which soften the blow, one day you will no longer have the 30% ruling. How can you avoid to pay EUR 0,52c over ever euro earned? Maybe generate  other income than salary income?

Rent privately owned office to your company. If you happen to own a property that is suitable to house your company office in, that is convenient. And as you learned that your Dutch property is taxed in Box 3 for about 1.2%, even if you have the 30% ruling. So you charge a high rent, which reduces the corporate income tax significantly, you receive money in your pocket and you are only taxed for 1.2%. Too good to be true.

Received rent tax free – indeed too good to be true

The Dutch tax office has thought about this scenario a long time ago and introduced Ter Beschikking Stelling (TBS). TBS stands for you the owner of the company makes available to the company an asset owned privately. This is not forbidden, but the asset it not taxed in Box 3 (1.2% wealth tax) but in Box 1 (52% tax rate).

Rent privately owned office to your company
Rent privately owned office to your company

Example rent privately owned office to your company:

Your BV company made a EUR 100.000 profit, taxed at 20% corporate income tax, hence EUR 20.000 corporate income tax is due.  The next year you have again EUR 100.000 profit, but you rented the building you own personally to the BV company for EUR 20.000, hence the profit is EUR 80.000 and EUR 16.000 corporate income tax is due. The rent income you receive is taxed in Box 1 in your income tax return for 52%. EUR 20.000 times 52% is EUR 10.400. Now you paid over the EUR 80.000 corporate profit and EUR 20.000 privately received rent EUR 16.000 corporate tax plus EUR 10.400 income tax is EUR 26.400 overall tax. That is more than the initial EUR 20.000 corporate tax.

Of course this example does not take into account the rent you are not paying to a third party anymore, but it is an indication of the situation. You might argue that the Box 1 rates starts at 37%, but that has already been used with the salary of the director, hence everything earned besides the salary is put on top in the income tax return, hence the 52% tax.

Rent privately owned office to your company – via your wife

The shareholder will counter to us that he could transfer the building to the name of his wife and she rents it out to the company. She has no shares in the company. But the rules in this respect are identical to the tax partner and children that are under age.

Some shareholders are more drastic and they suggest a divorce to generate a tax benefit. You might not believe me, but it is often suggested. Then we need to explain to our client that your wife might not fully trust you only divorcing for a tax benefit of the rental income and will launder you for every penny you have. Alimony to your ex-wife is tax deductible, but if that was the intended outcome of the renting out the building exercise, we doubt.

Orange Tax Services

Corporate tax planning is something you truly need to do ahead with one of our corporate tax experts. We have plenty of tax rules that make situations as they are now. We will be glad to explain them to you. Often the outcome is: make as much money as you can and simply pay the tax. That creates no issues with the tax office in the future during an audit.