Sebastian de GoeijShort answer
VAT you may not deduct as input tax is booked as part of the cost: the full amount including VAT goes to the expense account and nothing goes to recoverable VAT. That applies to VAT-exempt activities, private use and some entertainment costs. In the accounting package you use a VAT code for non-recoverable VAT, and the key is to do it consistently per type of cost.
Key takeaways
- Non-deductible VAT is a cost: book the amount including VAT on the expense account.
- Typical cases are exempt revenue, private use and some entertainment costs.
- With mixed use VAT is partly deductible, in proportion to taxed use.
- Use a fixed VAT code for non-recoverable VAT so the return is right.
- Autoboeker proposes VAT codes based on history and supports exempt administrations and rules per administration.
When is VAT not deductible?
VAT is deductible when the purchase is used for activities on which you charge VAT and you have a compliant invoice. Otherwise it is fully or partly non-deductible. Check the Dutch Tax Administration's rules or a tax adviser when in doubt.
- VAT-exempt activities, such as certain medical, financial or education services.
- Private use, or the private part of mixed use.
- Entertainment and business gifts above the BUA threshold.
- An invoice that does not meet the invoice requirements.
How do you book non-deductible VAT?
Book the full amount including VAT on the expense account, using a VAT code for no recoverable VAT so it stays out of the input tax box of the return.
With mixed use, split the VAT: the deductible part as input tax, the rest as cost. Record the ratio used and check it at year end.
- 1Decide whether VAT is fully, partly or not deductible.
- 2Choose the non-recoverable VAT code, or split for mixed use.
- 3Book the non-deductible part including VAT on the expense account.
- 4Check the VAT return: it must not appear as input tax.
- 5Capture recurring cases as a rule per administration.
What mistakes are common with non-deductible VAT?
VAT booked as input tax anyway, for example because a supplier's default VAT code was used, or structurally wrong when an exempt administration is not configured. The reverse also happens: deductible VAT booked as cost.
Inconsistency is the second trap: the same cost booked with and without deduction in different months. Correcting afterwards may require a supplementary return.
How does Autoboeker help with non-deductible VAT?
Autoboeker recognises VAT on every invoice and proposes the VAT code from the administration's history. Exempt administrations are supported, and administration and supplier-specific rules fix the VAT code for certain costs. It also checks for missing VAT, unusual VAT codes and unusual VAT amounts, so an invoice that differs from normal ends up in review.
FAQ
Questions about this topic.
As a cost: the amount including VAT on the expense account, with a non-recoverable VAT code.
It depends on the BUA rules, including a threshold per recipient per year. Check the Dutch Tax Administration for the current amount.
Split the VAT: the taxed business part as input tax and the rest as cost. Record and check the ratio annually.
Generally not on purchases for exempt activities; the VAT is a cost.
Yes, through history-based VAT code proposals, support for exempt administrations and rules per administration or supplier.
