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.

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!

VAT audit – how not to do that!

A company is a source of income

VAT audit, never a pleasant audit as the VAT department of the tax office is very rigid. What not to do during such an audit.

VAT Audit

VAT stands for Value Added Tax and that is charged on turnover. The amount of VAT received, as being paid by clients, is to be paid to the Dutch tax office. The VAT charged, as VAT on costs, can be reclaimed by the Dutch tax office. Mathematical this is a neutral system, psychological absolutely not a neutral system.

The VAT department of the Dutch tax office is rigid. With that I mean, really rigid. If VAT is not paid to the Dutch tax office that should have been paid, this is regarded money laundering. Money laundering is a criminal offence for which you can go to jail. Jail we think is rigid.

How not to do the VAT audit – not providing bookkeeping

Mind you, this case is about a tax advisor. The tax advisor should know better, then again, maybe this person was never fit to be a tax advisor in the first place. Hence I feel reluctant to refer to this person as collegeau, as I think he is not.

The Dutch tax office started an audit for the years 2014-2017. The tax advisor refused to provide the administration. The whole purpose of keeping an administration is to be able to have that audited!

The consequence of not providing the administration is that the tax office is going to impose what they think is the correct amount. The VAT reports show EUR 7.716 over a four year period. The tax office has the opinion that this amount should have been EUR 262.489 instead.

VAT penalties

In the Netherlands we have an UNA VIA rule. That implies, you cannot be charged for a crime twice. This implies that the Dutch tax office does not impose a fine for VAT issues, but has a criminal court case in which jail time is demanded. Fortunate for this tax advisor a penalty was put in place.

The penalty the tax office thought was good for this situation was a 100% penalty. 100% over the EUR 262.489. Amazing. The percentage is not 25 or 50, what is the more common penalty percentage. But 100 as this tax advisor has committed this crime before. The tax advisor has similar prior convictions with respect to VAT. That could be the reason this time the UNA VIA route of penalty instead of jail time was chose. Jail time had no influence apparently on the actions of this person.

VAT audit - court case
VAT audit – court case

VAT court case

In court the tax advisor claimed that the EUR 262.489 VAT on turnover was not correct as the majority of the clients was outside the Netherlands. However, if you do not provide the administration, the tax office cannot determine that. Upon this claim, the tax office asked proof of those 0% VAT invoices. In court the tax advisor provided the administration. The claim was reduced significantly.

The court reduced 100% penalty to 85% based on the period of time the court case took. Mind you, the audit probably started in 2018 and now, late 2021, the court came to a decision.

Tax is exciting

We think tax is exciting. An audit is exciting too, sometimes too exciting! If you start the audit already by not willing to provide relevant details, then you have issues. The civil servants of the tax office have plenty of time and means to play this game, as they are aware they will win the game. The win is basically in you getting bankrupt. The fees and penalties nobody can afford.

To keep tax exciting, we prefer to run a proper bookkeeping for you. To comply with demands of the tax office. Us, you and even civil servants with the tax office are human beings. We all can make mistakes, for that we have audits. For mistakes the tax office makes we have the court. Still, best to stay far away from that all.

Claiming back VAT on a car without being VAT entrepreneur

A company is a source of income

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.

VAT Entrepreneur

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.

Claiming back VAT on a car without being VAT entrepreneur

Time frame

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.

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.

Brexit and VAT

Entrepreneurs deduction (zelfstandigen aftrek)

Brexit and VAT needs to have your attention if you provide services to the United Kingdom.

Brexit and VAT

The United Kingdom has left the European Union January 31st 2020. From a practical point of view the tax consequences of this Brexit were postponed to December 31st 2020.

We are past the December 31st 2020 date when you read this, what does the Brexit imply for the VAT on your services to UK companies?

VAT on services to the United Kingdom

In the situation you are a service provider to a company in the United Kingdom that has a valid VAT number, you issued an invoice at 0% VAT. Now the UK has left the EU, the UK is a country outside the EU. When a country is outside the EU, the country is also outside the EU VAT system.

No VAT is charged on an invoice issued to a company or private person outside the EU.

Brexit van VAT

What is the difference between 0% VAT and no VAT?

The difference  between 0% VAT in the EU and no VAT outside the EU is a formality difference. Although a formality, you need to comply, otherwise the formality becomes expensive.

In the EU you can charge 0% VAT to the other entrepreneur. Important to check if the other company is indeed a VAT entrepreneur. In the UK it is possible to run a company and not be a VAT entrepreneur. Hence we always suggest to check at VIES if the EU entrepreneur is a VAT entrepreneur.

Under invoice requirement conditions 0% VAT can be charged. However, if the EU entrepreneur is not a VAT entrepreneur the 0% rate cannot be applied. The 21% rate is then applicable. Often the client will not appreciate that a lot. Suddenly the correct EU VAT number is provided to you.

What does no VAT imply?

No VAT implies you provide a service to a company or private individual outside the EU. For companies that is often easy to determine. That said, make sure you use the correct company details. If you invoice to a US Inc and you send the invoice to a Dutch address they also use, 21% VAT should have been charged.

The same applies to the private individual, how to determine the individual lives outside the EU. Please do some checking to the best of your ability, to avoid the Dutch tax office charges you with 21% VAT. VAT you often cannot claim with the private individual, as the price set was supposed to have been including VAT.

Tax-is-exciting

We think tax-is-exciting, formalities are often not. Then again, complying with formalities makes your life easier, than fighting them.  Follow the requirements, update you invoice content to your UK clients and be in line with new applicable VAT rules to the United Kingdom.

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.

Naheffingsaanslag omzetbelasting, what is that?

One man company bookkeeping

Naheffingsaanslag omzetbelasting, that is what we call ugly. Ugly in the sense that you are charged with a huge amount and you have no idea how the tax office came up with that amount. How to solve something ugly?

Naheffingsaanslag omzetbelasting, what is that?

The word Naheffingsaanslag is a word only used when it involves tax. As you know we love tax, but not the naheffingsaanslag. This is basically an assessment for tax you were supposed have paid already, but you did not.

The word omzetbelasting is Value Added Tax, for the purpose of this article referred to as VAT. VAT you know, or you should know.

Naheffingsaanslag omzetbelasting

What is the naheffingsaanslag omzetbelasting about?

Actually it is very simple and effective. When you registered a company, and you did, as such assessments are only send to entrepreneurs, you were also issued a VAT number. With the VAT number you were told when to file the VAT return. Often that is a quarterly obligation, but it can also be annual.

The tax office expects you to file as you were told by them. The reality is that most starting entrepreneurs misinterpret this obligation. The assumption is that this VAT return is obliged to be filed when VAT was charged to a client. Often in the start up face nothing was charged yet, hence no VAT to be reported. This makes starting entrepreneurs assume there is no need to file a VAT return.

That is an incorrect assumption. The VAT return is always filed, even if nothing is to be reported. But is there nothing to be reported when you have not issued any invoice yet to a client? Of course there is! You made costs and we can only assume you received a receipt in name of the company. And on that receipt is stated you paid VAT on the costs made. That paid VAT you can reclaim from the tax office.

So suddenly the strange obligation can become an opportunity to claim some tax back. Are you getting excited already? We are.

How to get you in line?

You have not filed the VAT return. You either forgot, did not know how to file or were under the assumption that with no turnover, no VAT return needs to be filed.

The tax office is keen to get you in line and in the Netherlands that is done with ex officio assessments. An ex officio assessment is an assessment where the tax office puts in a random amount. The random amount is random enough to get you to respond. If you do not respond, the tax office will ask the collector to collect the amount. It is not a suggestion, it is an assessment.

What are the intentions of the tax office?

What are the intenetions of the tax office with this naheffingsaanslag omzetbelsting? The intention is not to collect the random amount they charged you. The intention is to force you to investigate how to solve this naheffingsaanslag omzetbelasting. Often you investigate and come to the conclusion you need an accountant.

Do you need an accountant? Call us – Tax is Exciting!!

We can help you out solving this naheffingsaanslag omzetbelasting. Excitement could come from holding your hand, to help you through the process. We also assist you in setting up your administration in such a manner that you do not get such an assessment the next quarter again. Feel free to contact us.

Incorrect VAT filing

Incorrect VAT filing is a topic that has the undivided attention of the Dutch tax office.  The tax office will make sure the correct amount of VAT is paid in the end and the justice department will address you as a money launderer. To put it in perspective.

Incorrect VAT filing

VAT (Value Added Tax) is maybe simple to you. You charge 21% VAT to the client and if you are charged with VAT you claim it back.

However, in order for an invoice to be compliant for VAT purposes the invoice needs to meet the invoice requirements. The invoice needs to contain details like name and address of the company, of the client, obvious invoice number, chamber of commerce number etc. Then the VAT needs to be correctly calculated or if the VAT is charged at 0% or no VAT is charged, you need to state why.

incorrect VAT filing
incorrect VAT filing

Basically you need to see the invoice you as company send out as a bank note. A bank note without the water mark, or in pieces or an obvious colour copy  is not accepted by you or the bank. The same applies to the invoice with respect to the tax office. If the invoice requirements are not met, the invoice is not a VAT invoice.

That does not imply you do not need to pay the VAT you received, as the law dictates that if VAT is paid to you, you need to pay the amount to the tax office.

Vice versa it is the same. If you as company pay costs with VAT but either the wrong country VAT was charged, or no VAT should have been charged or the invoice does not have an invoice number or incorrect invoice number, it is not a VAT invoice and you cannot claim back the VAT.

But it can always get worse.

Incorrect VAT filing – court case

A Dutch BV company trade in vegetable oil and fats oil if I translated that correctly. The BV provided the service of taking out the oil residue from vessels in the harbor, send out trucks to collect oil from ships elsewhere and purchased used oil.

The justice department investigated the company and charge the company with money laundering and invoice fraud. The director of the BV was prosecuted and the tax office determined that the company did not pay EUR 1.2 mln in VAT it should have paid. The fine for this crime is 50% over the amount that was paid short. Basically the EUR 1.2 mln VAT that was paid short was caused by taking into account invoice with paid VAT that were incorrect. So the VAT deduction of VAT paid on invoices for service, turned out to be fraudulent invoices.

The director appealed and stated that no thorough audit had taken place and the VAT claim was only based on the Justice department research, which is not an audit. Moreover the fine was in conflict with the ‘one way’ justice . That implies you cannot be charged twice for the same crime.

The court ruled that the tax inspector has made clear beyond reasonable doubt that false invoices were processed, which justifies the EUR 1.2 mln VAT assessment and the corresponding 50% penalty.

The ‘one way’ system was not compromised according to the court, as money laundering, creating fraudulent invoices, active use of false documents are not the same as incorrect VAT filing.  The fine was slightly reduced due to correction in the final VAT assessment and the fact that the period of time from the audit (2012) to the court case (2019) was rather long.

Orange Tax – Tax is Exciting

The road from running an oil trading company to becoming a convicted criminal with ditto record  can easily be walked via your VAT filings. We think that is not exciting. We do instruct clients how to go about with the books, we feel sometimes like school teachers. But in the end there is a purpose to these actions, to make you compliant. That is exciting.

VAT returns straight from the hip

The VAT returns (Value Added Tax) is not a return you should file straight from the hip (cowboy style), but needs to be done with the utmost care. Otherwise you go to jail, that is certainly not exciting.

VAT returns- exact science

One company charges VAT to another company. For instance a EUR 100 invoice is send plus EUR 21 VAT. The business client pays to the company EUR 121. This company then pays the EUR 21 to the Dutch tax office. The business client paid EUR 121 and claims back EUR 21 from the Dutch tax office.

So a EUR 100 invoice was issued and paid and neither company actually was due in the end VAT. That is the system. Because the only person that actually pays the VAT is the private individual or a company that is not a VAT entrepreneur.

For the Dutch tax office it is very important to actually receive the EUR 21 from the previous example and not for instance EUR 15 instead. Because the business client will charge back EUR 21. If then the Dutch tax office was paid EUR 15 they come up short EUR 6.

The VAT amounts being pumped around are millions, missing out a couple of hundred million is a problem. Hence the Dutch tax office addresses not paying enough VAT as money laundering and the company not paying enough is than addressed as a criminal in court. This is the place no company or person wants to end up. You think.

VAT filing like a cowboy

VAT returns –straight from the hip – court case

Then there are the gamblers. One was running a wholesale store as managing director and sole shareholder. He thought he could gamble what could be the amount of VAT due and accordingly he filed over the years 24 monthly VAT returns straight from the hip. However, it was a safe bet, as he was certain he was not paying too much VAT.

The gamble did so , as he was addicted to gambling. Persistent is the word I think.

The tax office did an audit over the years 2012 and 2013 (mind you, the outcome of this audit was only recently finished) and came to the conclusion that the VAT that should have been paid was EUR 196.742 short. The gambler admitted that he thought that would have been the case.

The court decided that the case of paying too short VAT was proven and sentenced the gambler to two months prison and 240 hours community work. And ofcourse the VAT amount short was due.

A gambler would not be a gambler if he would not take the chance of appeal.

So the gambler appealed that the tax office already sentenced him by asking to pay the shortfall of VAT, hence another verdict for the same crime could not be possible.

The high court disagreed, as the tax office had not issued any penalties to the gambler, so he was not yet punished for his crime. Hence no case of being charged twice for the same crime applied. Moreover the high court was convinced the gambler had it all planned. He deliberately denied the Dutch tax office the tax due. The high court sentenced eight months in prison.

Orange Tax Services – Tax is Exciting

Bottom line of the above is that the VAT return is exact science and not a gamble.