VAT issues for startups

Eindhoven Startups Foundation9 September 2015

Value Added Tax

byJürgen van de Sande

Program

• Who I am / who is De Wert?

• Part 1:– VAT Entrepeneurship– VAT Declaration

• Part 2:– Invoice requirements– Mini One Stop Shop

Who I am?

Jürgen van de Sande AA

accountant partner

starting companies and growers SMEsannual reports, fiscal declarationsfinance, structure/organization, acquisitionhuman resources, dwo and accountancy departments

http://www.linkedin.com/in/jurgenvandesande

OUR VISION

An entrepreneur’s life is full of important events. Like starting your company, growing or downsizing, cooperating or ending

your business. Each and every choice you make will affect the future of your company.

De Wert is your partner of choice. We have been supporting entrepreneurs since 1959 with accountancy, tax and HR advice, payroll and administrative services. Therefore, no matter what

phase your company is in: rest assured with De Wert.

Who is De Wert?

The first step is the hardest …

Little ones grow

Sometimes it hurts to let go

VAT Entrepreneurship

START: determine whether you are a VAT-entrepreneur.

For the VAT it is NOT important if you want to make a profit or if you actually make one!

VAT0% 6% 21%

ExemptReverse charge

NO VAT


WHO?

- Everyone- Independent- Durable


WHEN?

Participating in the economy:- Action- Focused on consumption by an individual party- Non-symbolical payment that is directly linked to the

action


WHERE?

Country of service or sales is fixed by law.

2 types of VAT with different rules to determine which countries’ law is applicable.

1. VAT related to services2. VAT related to purchase and selling of goods

Question

John has a company that organizes a yearly dance festival. In 2012 and 2013 the losses were - € 10k and - € 15k, in 2014 the profit was € 25k.

VAT entrepreneur or not?

Answer: Yes, John is a VAT entrepreneur. WHO, WHEN and WHERE are all applicable. The fact that John’s company doesn’t make profit every year is NOT RELEVANT for the VAT. It is relevant for the income/company tax however.

1. VAT related to services.

Services are: any actions for which you receive payment and that do not constitute supplies of goods. Includes internal services (use of services from your business for non-VAT business activities).

B2BMain rule for B2B is that the country of service is the country where the

customer is based. There are exceptions, for example when services have to do with immovable

property.

B2CMain rule is that the country of service is the country where the supplier is

based.


2. VAT related to purchase and selling of goods

- Selling goods;- Selling goods on hire purchase;- Building and delivering immovable property;- Supplying and installing or assembling goods (e.g. kitchens);- Supplying goods internally

You always have to follow the actual journey of the goods. The main rule is that if the goods are transported, the VAT law of the country where transport started is applicable. Different rules apply with ‘distance sales’.


Distance sales

Applicable when an entrepreneur sells goods to private individuals or non-VAT entrepreneurs, and the goods are transported from one EU country to another EU country.

This special rule is designed to prevent individuals from shopping in the country with the lowest VAT rate.

When a seller exceeds the threshold for that country, he has to apply the VAT rate of that country and registrate at the foreign tax office.


VAT or no VAT (exemption)?

No VATSome services or goods are not taxable with VAT. For example:

letting or selling immovable property, which is more than 2 years old. Education, healthcare services etc. etc.

VAT- Which amount is taxable?- Which VAT tariff: 21%, 6% or 0%?- When do you have to pay VAT?- Refund of input taxes (VAT you pay on purchases) VAT declaration: to pay/ to receive

VAT Declaration

VAT Declaration

Logic of the VAT declaration:

1.Supplies/services BY me2.Supplies/services reverse charged TO me3.International supplies/services rendered BY me4.International supplies/services rendered TO me5.Calculation of total to be paid or refunded

VAT Declaration/ 1

1a. Output 21%. Standard (high) tariff.1b. Output 6%. The 6% tariff is also called the low tariff. This

tariff is applied to many common products or services, such as food and drink, agricultural products and services, medicines, books, daily newspapers and magazines.

1c. Other tariffs, except 0%. Only applies for sports- and company canteens.

1d. Private use of a company car, phone, goods, gas, water and electricity. Normally corrected in the last VAT declaration of the year.

1e. Supplies/services taxed at 0% or not taxed at your level.

VAT Declaration/ 1d

Entrepreneurs and their cars-Entrepreneur with a company car. VAT is fully deductible (as long as the car isn’t used for exempt services). In the final VAT declaration of the year 2.7% of the catalogue price including VAT/BPM (1.5% for cars that were already used for 5 years) has to be corrected. OR: a correction can be made, based on actual private use as kept in an administration.

-Entrepreneur with a private car that is used for the company. VAT that is related to business use is deductible. No administration? Possibility for opting for 1.5% of the catalogue price (including VAT and BPM)

VAT Declaration/ 1e

1e. Supplies/ services taxed at 0% or not taxed at your level.

- Supply of goods and services that are taxed with 0% VAT;- Supply/ delivery of an immovable property in which you and

the buyer have opted for a taxable supply. Reverse charged VAT;

- Supply of goods and services on a sub-contract basis and outsourcing of personnel in the (ship)building & metal construction industry, and delivery of mobile phones, computer chips and waste/ used materials. Reverse charged VAT

21

VAT Declaration/ 2a

2a. Tax reversed TO you

Examples of situations in which the VAT has been reverse charged to you:

• Supplies of goods and services on a sub-contract basis and outsourcing of personnel in the (ship)building and cleaning industry.

• Immovable property, if the option of a taxable supply was selected for the supply of business premises.

You must calculate the VAT yourself. This amount can be deducted as input tax (5b). See explanatory notes to question 5b further in this presentation.

Question

A building company is building a house and commissions you (a painter) to paint all frames and doors. Your invoice (and payment) is € 5.000. What do you mention in the tax declaration?

VAT Declaration/ 3b

3b: Intra-Community transactions.

Enter the amount of the goods supplied and services provided within the EU. This amount should be specified in the Intra-Community transactions declarations (opgaaf ICP) in the period during which the services are supplied. The invoice date is irrelevant!

Supplied goods: Goods that you supplied from the Netherlands to an entrepreneur in another EU country. You transported these goods. The customer must declare VAT on the acquisition of these goods.

Supplied services: Services supplied to a EU-entrepreneur. The foreign entrepreneur has to declare the VAT in his own country. If the main rule doesn’t apply: don’t state these services in the tax return.

VAT Declaration/ 4a

Goods and services supplied TO you from abroad

4a: Supplies/services from non-EU countries.- You imported goods into the Netherlands from outside the EU,

using article 23 authorisation.

- You purchased services in the Netherlands from a non-EU- entrepreneur who has reverse- charged the VAT to you. In this case, you must declare VAT in the Netherlands. The amounts need not be broken down according to the various VAT rates. Under certain conditions, you can deduct the VAT as input tax under question 5b. On balance, you will not pay any VAT.

VAT Declaration/ 4b

4b Supplies/ services from EU countries- You purchased goods from EU-entrepreneurs and those goods have

been transported to the Netherlands. This is called an intra-Community acquisition: you must declare VAT in the Netherlands. Your supplier did not charge foreign VAT;

- You purchased services in the Netherlands from an EU-entrepreneur who has reverse-charged the VAT to you. You must declare VAT in the Netherlands. The amounts need not be broken down according to the various VAT rates.

Under certain conditions, you can deduct the VAT as input tax under question 5b. On balance, you will not pay any VAT. Intra-Community services must be declared during the period in which they are provided. The invoice date is irrelevant.

VAT Declaration/ 5b

5b Input tax

Input tax is Dutch VAT on goods and services that you purchased for your business. They include:

- VAT charged to you by other entrepreneurs;- VAT that you must pay, because the VAT has been

reverse-charged to you (question 2a, 4a or 4b).

VAT Declaration/ 5b

Conditions for deduction of input tax

You must be able to provide evidence of the VAT you deduct as input tax, base on invoices that meet the statutory requirements.

VAT Declaration/ 5b

You may only deduct the VAT that you paid on purchases of goods and services if you meet the following two conditions:1.You use the goods and services for commercial purposes, i.e. for your business. You may not deduct the VAT on goods and services that you only use for private purposes.2.You use the goods and services for activities that are subject to VAT. You cannot deduct VAT as input tax if you use the goods and services for exempt business activities.

It is possible that you purchase goods or services that you:- use for both business and private purposes;- use for both taxed and exempt activities;These situations involve mixed use. Alternative rules apply here.

VAT Declaration/ 5b

Please note!

You cannot deduct VAT on certain business expenses. For example in the following situations:

- Purchases that you use for exempt business activities;- Food and drinks in hotels, restaurants and cafés- Purchases that you use for employee benefits, if the

benefit per employee is more than € 227.

VAT Declaration/ 5d

Requirements for Small businesses scheme (KOR): VAT discount for small entrepreneurs.•Your business must be registered in the Netherlands (unless you run a foreign business that only provides services in the Netherlands).•You run a one-man business or your company is a joint venture involving natural persons, such as a partnership (maatschap) or a general partnership (VOF).•After deduction of input tax, you pay less than €1.883 on an annual basis in VAT.•In order to be eligible for exemption from the administrative obligations, the amount to be paid must be less than €1.345 on an annual basis.

Invoice requirements

•the name and address of the supplier•the VAT identification number of the supplier•your name and address•the invoice number•the invoice date•the date on which the goods or services were supplied•the quantity and type of goods supplied•the nature and type of services supplied

Invoice requirements

Invoices must also include the following data for every VAT tariff or exemption:•the price per piece or unit, excluding VAT•any reductions that are not included in the price•the VAT tariff that has been applied•the cost (the price excluding VAT)•in case of advance payment: the date of payment, if this is different from the invoice date•the amount of VAT•in some cases your VAT identification number must also be included on the invoice. This is the case for export of goods to other EU countries and for certain services involved thereby, such as transport services. Your VAT identification number must also be included on the invoice in cases of reverse-charging•furthermore it must be apparent from the invoice whether a special VAT regulation applies

Question

Deduction of input tax:

YES or NO?

Mini One Stop Shop/ MOSS

Changes to digital services as from 2015

•As from 1 January 2015, the rules on telecommunications, broadcasting and electronically supplied services (digital services) have changed. Starting then, these services are taxed in the country of residence or establishment of your customer. It does not matter if your customer is a private individual or entrepreneur.•In order to prevent you from having to register in each EU Member State where you supply digital services, the Mini One Stop Shop (MOSS) scheme has been introduced on 1 January 2015. This scheme allows businesses supplying digital services to private individuals to state the VAT on these services via one EU Member State.

Mini One Stop Shop/ MOSS

Digital services include:

•Electronic servicesThese are services supplied through the Internet or a digital network. They are mostly automated services and cannot be supplied without information technology. Examples: on-line traffic information and weather reports, on-line daily newspapers and magazines, on-line data storage, access to or downloading software, use of search engines and on-line games.

•Telecommunication servicesThese services include the transmission, broadcasting or reception of signals, text, images, sounds or information through wires, radio waves, optic or other electromagnetic systems.

•Radio and television broadcasting services

MOSS / VAT Rates

VAT rates can be found at: http://ec.europa.eu/taxation_customs/tic/public/vatRates/vatratesSearch.html#content

MOSS / Declaration

Mention each EU country, even when your turnover in that country is zero.

Questions?

Economy & Finance

VAT issues for startups