How to apply VAT reduction for small businesses (Dutch)

[Roeland]

In Holland we have a rule that you can get a VAT reduction for small businesses. How do I handle this in Manager?

Example:
A photographer has annual sales (excluding VAT) of € 30,000. About this 21% sales tax will be charged. That is € 6,300. He bought goods (such as cameras, films, filters and lenses) with € 5,330 VAT which he has paid. This amount may be subtracted as input tax. To determine how much tax he has to pay, he makes the following calculation.

VAT 21% on € 30,000               € 6,300
Tax bought goods                  € 5.330-
VAT amount payable                €   970
Reduction for small businesses    €   970-
To pay                            €     0

The VAT reduction leads to more profit. So I need to add the income tax return for the benefit of the VAT reduction to count on the results. But how do I handle this in Manager? I do not physically get paid to my bank account (the amount to receive is € 0). In Manager, at Summary, Other liabilities, I still see I need to pay Tax.

Thanks for your cooperation!

[lubos]

To be honest. I’ve never heard of this. But if the government is really forgiving VAT payable, simply create new income account called VAT reduction for small business or something like that. Then make journal entry where you…

• Debit Tax liability by 970 EUR
• Credit VAT reduction for small business by 970 EUR

[Roeland]

Thanks for your answer; this did the trick!

[Bogey]

Hi guys,

@Roeland As a matter of fact we’re discussing Dutch/EU VAT taxes here:

How to handle reverse charged VAT

That is correct. The supplier must issue an invoice without VAT. The following screenshot shows an overview of figures to be filled in a Dutch VAT form. There are five sections: the first four refer to amounts over which VAT has to be paid; the fifth shows the VAT amount to be paid, the VAT amount to be refunded, and optionally whether you qualify for a VAT deduction. For purchase invoices, lines 4a, 4b, and 5b will matter the most to most businesses. On line 4a, the total price of all pu…

@lubos What Roeland is referring to is field 5d on the Dutch tax form (in thread mentioned above).
It’s a formula used to give small business owners an extra VAT deduction.

[Roeland]

Something has changed in Manager concerning the VAT reduction for small businesses (Dutch) for 2019. It used to be, that I applied the suggestion of Lubos:

@lubos

To be honest. I’ve never heard of this. But if the government is really forgiving VAT payable, simply create new income account called VAT reduction for small business or something like that. Then make journal entry where you…

• Debit Tax liability by 970 EUR
• Credit VAT reduction for small business by 970 EUR

Everything worked well, that is, for the new year the statement ‘VAT reduction for small business’ at Income started at € 0 again, and the statement of ‘VAT to pay’ at Liabilities also started at € 0. But now, both fields sum up all VAT transactions of all the years I am using Manager.

I don’t think that is the right way of presenting the figures. Moreover: I am interested in the figures that are relevant only for the current year. What has changed in the last version of Manager?

Note: for the Netherlands 2019 is the last year one could apply for tax reduction in this way. As per January 1, 2020, this has changed: you have to choose which way to use tax for small business, either by doing it as all companies do, or by applying for the ‘new tax reduction’ by not using tax on invoices anymore (for revenues < € 20.000 a year).

[Joe91]

The “Vat Reduction for small business” is an income account - all income and expenditure record the income and expenditure for a period. So when you start a new year, the Summary screen dates will be changed to reflect the new year and the P & L reports will be for the new year, so will always so zero until a transaction is recorded

The “VAT to pay” is a liability account and will always show the cumulative total since the start date or since the beginning of the business

If it is zero, it means that you have paid the VAT due by year end and so is zero

[Roeland]

I found the error. As I have multiple administrations in Manager, I can compare each one and I noticed that with the administration where the error was, the TAX accounts where not filled in correctly (see screendumps). I corrected this and now it is OK.

[Patch]

You appear to have found the same issue as here

@Patch

Manager’s handling of the account “Tax payable” has recently changed. From Releases page

09 Dec 2019 Fixed tax payable starting balance issue by converting it from built-in account into regular account (see topic) 19.11.85

In the past it was a special system account automatically created when a tax code was used, and the default account in all tax codes unless a specific account was selected by the user. Now “Tax payable” is an ordinary account (which can be deleted or renamed if present at all in a COA), and all tax codes default to “Suspense account” unless explicitly set to a specific account.

The Tax code guide has been updated to reflect this change and if Managers version update code does not automatically implement the conversion you will need to manually configure the account used by each of your tax codes, see the updated guide on tax codes for details.

[Roeland]

Thanks for the info!