Booking reverse-charge VAT and foreign purchase invoices

How do you book a domestic purchase invoice with reverse-charge VAT?

You book a domestic purchase invoice with reverse charge without VAT to the supplier, declare the VAT yourself in box 2a and, if entitled to deduct, deduct it in box 5b. The supplier shows no VAT amount on the invoice, but does state btw verlegd (VAT reverse charged) and the buyer's VAT identification number. Well-known examples are subcontracting in construction and goods already in the Netherlands sold by a foreign seller that is not established here.

An example: a construction company receives a subcontractor's invoice of €10,000 with reverse charge. The books show €10,000 on subcontracting costs against €10,000 on accounts payable. With the reverse-charge VAT code, box 2a gets a base of €10,000 and €2,100 VAT, and the same €2,100 goes into 5b as input VAT. On balance the company pays nothing, but both lines must be in the return.

How do you book goods and services bought from another EU country?

You book goods and services from a business in another EU country with a VAT code for EU acquisitions, so the value and the Dutch VAT go into box 4b and the deduction into 5b. The invoice usually shows 0% or reverse charge, with the VAT numbers of both supplier and buyer. For goods this is called an intra-community acquisition: the goods move from another EU country to the Netherlands and the buyer calculates Dutch VAT at the rate that applies here.

An example: a web shop buys €5,000 of goods from a German wholesaler, which invoices at 0%. The booking is €5,000 on purchases against accounts payable, with box 4b base €5,000 and €1,050 VAT at 21%, and €1,050 input VAT in 5b. An advisory service from a Belgian firm goes through 4b in the same way. Always check the rate: for goods that fall under 9% in the Netherlands, you apply 9%.

How do you book services and imports from outside the EU?

You usually book services from a business outside the EU with reverse-charge VAT in box 4a, with the deduction in 5b. Think of a software subscription from an American supplier of €1,200: base €1,200 and €252 VAT in 4a, and €252 input VAT in 5b. If the invoice is in dollars, convert to euros and book exchange differences on payment separately.

For imports of goods from outside the EU, VAT is in principle paid to customs, and you deduct that VAT as input VAT in 5b based on the customs document. If your client has an Article 23 licence, import VAT is not paid to customs but declared in box 4a and deducted in 5b at the same time. The base is then the value used by customs, as shown on the payment notice, not the supplier's invoice amount. That difference is a common mistake.

Which checks belong with it: VIES, the ICP return and OSS?

Every EU transaction calls for a check of the VAT identification number in VIES, the European Commission's VAT number validation system. On purchases you check the supplier's number; on sales a valid buyer number is a condition for reverse charging the VAT. If it cannot be established who the buyer is, the tax authority can assess the VAT from the supplier.

On the sales side, two schemes come on top. Supplies and services to businesses in other EU countries with reverse charge are reported in box 3b and also in the ICP return (opgaaf intracommunautaire prestaties). Sales to consumers in other EU countries above a threshold of €10,000 per calendar year fall under the VAT of the customer's country, and that VAT can be declared quarterly through the Union scheme of the One Stop Shop (OSS). In summary:

• VIES: check the VAT number of EU suppliers and EU customers and keep the result.
• ICP return: intra-community supplies and services to businesses, reconciled with box 3b.
• OSS: distance sales and certain services to consumers in the EU above €10,000 per year, reported quarterly.
• Records under the Union or Import scheme of the One Stop Shop must be kept for 10 years.

Which mistakes are most common with reverse-charge and foreign VAT?

The most common mistake is booking a reverse-charge invoice as an ordinary invoice without VAT. Then both the VAT due in 2a, 4a or 4b and the deduction in 5b are missing. With full deduction rights it seems harmless because the balance is zero, but the return is wrong, and for a client with exempt turnover real money is involved. Exempt businesses must declare reverse-charge VAT without being allowed to deduct it.

Other mistakes lie in the choice of box and in the base amount. They often stem from a VAT code that was once set up wrongly and is then reused over and over. In your review, watch especially for:

• Mixing up 4a and 4b, for example with a supplier that has an EU branch and a parent company outside the EU.
• Deducting foreign VAT, such as German VAT on a hotel bill, as Dutch input VAT; you reclaim it through the refund procedure.
• Using the invoice amount instead of the customs value for imports under an Article 23 licence.
• Booking an EU invoice at 0% without checking the VAT number in VIES.
• Applying the wrong rate on acquisitions, such as 21% on goods that fall under 9%.

How does Autoboeker help with reverse-charge and foreign VAT?

When processing invoices, Autoboeker recognises reverse charge, distinguishes suppliers inside and outside the EU and supports international VAT situations and ICP, for Exact Online, Twinfield, SnelStart and e-Boekhouden. VAT numbers are checked through VIES and the VAT code is proposed based on the administration's history. Foreign currencies are detected, with optional automatic conversion. VAT-exempt administrations are recognised too.

Autoboeker also checks for missing VAT, a deviating VAT code and a deviating VAT amount, and flags them instead of booking them silently. If something is missing, such as the supplier's VAT number, a client question can go to the client. VAT analysis and reports are available for Exact Online, not for the other packages. Autoboeker does not file the VAT return, ICP return or OSS return itself; that remains the firm's work.