Filing zero or empty VAT returns can have consequences. Sometimes an empty VAT return is due to misunderstanding the system, sometimes by lack of business.
Filing zero or empty VAT returns
VAT stands for Value Added Tax and every company in the Netherlands is subject to VAT, unless an exemption is in place. The VAT is an important source of income for our Government, hence carefully looked at. Entrepreneurs filing zero or empty VAT returns in a sequence will get the attention from the tax office. That is never a good signal.
Filing zero or empty VAT return – misunderstanding the system
The VAT systems is that you charge 21% VAT (in general) for the service or goods you provide or sell in the Netherlands. The moment you provide a service or sell goods outside the Netherlands but inside the EU, the 0% VAT rate could be applicable.
A 0% VAT rate does not imply you have a zero VAT return. You need to indicate in the VAT return the amount of 0% services and or 0% goods. Then next to that VAT return you file a ICP VAT return in which you indicate to which VAT entrepreneurs you provided the services or sold the good in the EU.
The moment you leave out the 0% turnover in the VAT return but you do claim VAT back, this is strange and the tax office starts to pay attention to you as entrepreneur.
VAT return outside the EU
In the situation that you provide services to a client outside the EU, you charge no VAT. The VAT is then out so scope and also not part of the VAT return. The correct VAT filing implies an empty turnover side, and you claim VAT back. Again you receive attention from the tax office.
What does the attention of the tax office imply?
The tax office sees in a sequence no turnover being reported and sends you a simply question: why is there no turnover to be shown and what your expectations in the short future? If you have turnover outside the EU, you state you have turnover outside the EU. If you have 0% turnover in the EU, you state you have 0% turnover in the EU. That you processed in correctly, will be solved plus a penalty.
Filing zero or empty VAT return – consequences
Often in the situation a company is registered next to employment income, it is the company not being a true business. Becoming an entrepreneur is not for everybody. Or, a smart employer rewards the employee enough to terminate entrepreneurial thoughts.
The moment the business is a loss making enterprise, the loss is compensated with the positive employment income. In short, the tax office is funding the business with refunds. The tax office is not in the business of giving back money for nothing. Hence both the income tax and VAT department are keen on locating non-businesses.
Hence, if you file in a sequence zero or empty VAT returns. The tax office sends you the above mentioned information request. If you do not answer up to the satisfaction of the Dutch tax office, the VAT number is revoked. No more VAT number, no more VAT reclaim.
The day your business does become profitable, that is the day you inform the tax office. If all is well, the VAT number is then activated again.
Tax is exciting
We think tax is exciting. Completing an empty VAT return is not exciting at all. The moment we complete your empty VAT return, it is done correctly. Hence no missing EU turnover, hence truly no turnover made. Not turnover is no income, no business, no money. Therefore not exciting.
The tax office shares that thought and disconnects the VAT number is this happens in a sequence.
