Right Format of Tax Submission for You

It is important for both the supplier or service provider and the buyer to determine whether a reverse charge mechanism is applicable or not. If the supplier or service provider incorrectly calculates VAT, this can have consequences for the right of deduction of the customer. If the supplier or service provider incorrectly applies the reverse charge mechanism, the tax authorities can collect the unpaid VAT from him. 

The fact that there may be uncertainty about the scope of the reverse charge mechanism was evident from a recent judgment by the Den Bosch Court. This Court recently ruled that the reverse charge mechanism could be applied to the supply of non-ferrous metals, even if the supplier did not have the correct VAT number of the customer and there was VAT fraud. The judgment of the Court is also relevant for the application of other reverse charge arrangements.

Importance for entrepreneurs

It is therefore important for entrepreneurs to pay attention to the reverse charge mechanism and to use it correctly. Suppose a supplier incorrectly does not apply the reverse charge mechanism and thus incorrectly mentions VAT on the invoice. If this supplier pays the VAT, the tax authorities will in principle not collect the VAT from the customer. There is a policy that the tax authorities do not collect VAT from both the supplier and the buyer. We have informed you about this before . However, if the supplier is unable to pay the VAT due to liquidity problems, an additional assessment can be made at the customer. A situation that is not inconceivable because of the corona crisis. Incorrectly calculated VAT may not be deducted.

In addition, we recommend that suppliers and service providers who apply the reverse charge mechanism ensure that they have a valid VAT number for their customer. Although we agree with the Court that this is not necessary for application of the reverse charge mechanism, this prevents problems. Make use of the sales tax calculator zip code in this case.

If a company achieves an annual turnover, excluding VAT, that remains below certain thresholds, the VAT declaration obligations may change. Is that the turnover of the year itself or that of last year and what exactly changes? Have a look:

  • Annual turnover ≤  € 25,000

VAT exemption for small businesses

Just freshen up. Under the system of small businesses (Article 56bis of the VAT Code) , a business can apply for the exemption to charge VAT on outgoing invoices and, moreover, it no longer has to submit VAT returns. The downside of the coin is that the company no longer has the right to deduct the VAT it pays itself to its suppliers. The legal form of the small business can be a natural person, a company, association or public institution.

Turnover threshold

Anyone who wants to benefit from the small business scheme may achieve an annual turnover that does not exceed € 25,000 (Article 56bis of the VAT Code). In principle, it is the turnover of the previous calendar year that will determine whether the company can switch to the small business scheme. In other words, if the turnover in 2017 was not higher than € 25,000, the company can fall under the small business scheme from 01.07.2018. You must then notify the competent VAT inspection office before 01.06.2018.