Bookkeeping & VAT

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Around bookkeeping, handling VAT seems to be about the most complex thing for me. Let's fix that.

Starting points

These are the thing I know for sure:

Account 'VAT: Pretax' - 'BTW Voorbelasting'

  • I need for sure a bookkeeping account (boekhoudrekening) called VAT pretax (BTW: Voorbelasting) and a account VAT due (BTW: Verschuldigd)
  • I don't need separate accounts for low/high VAT rates and currently, as (so far) I always charge with high VAT tariff. With other words, the amounts relating to low VAT rate are always 0. I don't need accounts for just holding those 0s.
  • I don't need separate accounts for payed foreign VAT
  • I need both accounts pretax and due, rather than one account that maintains the nett amount due, for I need to state both amounts separately to the Belastingdienst in monthly VAT submissions.

These are balance accounts. They have no bearing on the income statement.

Disbursing VAT is normal

When a business is having revenue and generating a profit, there will usually be a nett VAT payment, not a nett reception.

Of course, there can be exceptions. One example is an artist whom I know: Her costs are local, but her customers are all outside the EU hence she invoices with 0% VAT. The end result: She always gets VAT back (or 0), but never has VAT due to the Belastingdienst.

Example

Mutations

A company sells for € 1.000 (ex. high VAT rate):

* Revenue (high rate):              € 1.000
* VAT invoiced (high rate):         €   210
* Accounts receivable:      € 1.210

The company also buys for € 500 (ex. low VAT rate) and € 250 (ex. high VAT rate):

* Inventory:               € 500
* VAT payed & to get back: € 105
* Accounts payable:              € 605

and

* Inventory:               € 250
* VAT payed & to get back: €  22,50
* Accounts payable:                  € 272,50

Resulting balance sheet

* Accounts receivable:      € 1.210    |
* Inventory                 €   750    |
* VAT payed & to get back:  €   127,50 |
* VAT invoiced (high rate):            | € 210
* Accounts payable                     | € 877,50
* ----------------------------------------------
* Subtotal:                 € 2.087,50 | € 1.087,50
* Equity =                             |
  assets - liabilities =               |
  € 2.087.5 - € 1.087,5 =              | € 1.000
* ----------------------------------------------
* Subtotal:                 € 2.087,50 | € 2.087,50

VAT submission

The figures for the VAT submission, can easily be copied from the balance sheet above. In total, € 82,50 need to be payed.

See also