How to handle reverse charged VAT

6

I was facing the same issue, but have solved it slightly different.

I have a business located in the Netherlands. This means that when I buy goods or services from within Europe or outside Europe, the supplier should send me an invoice without VAT. At the end of every quarter I have to report to the tax authority. This entails that I have to pay VAT on foreign purchases, although I haven’t paid any VAT. This VAT, however, can be claimed to be refunded. So at the end, no VAT has to be paid on foreign purchases.

The tax authority complicates the matter in that I have to report the VAT (to be paid on foreign purchases). There is a box for purchases inside Europe and a box for purchases outside Europe. To get these VAT amounts refunded I have to add them up to the VAT of any other (normal) purchases.

To simplify the reporting to the tax authority for myself, I want to create a report which tells me the amounts to fill in the three boxes mentioned above. Therefore, I have added two custom VAT codes: BTW 21% EU and BTW 21% non-EU. Additionally, when recording an invoice from a supplier outside Europe (say 1000 EUR), I have to record the following three lines:

  1. On the first line I allocate the expense amount (1000 EUR) to some account without VAT.
  2. On the second line, I allocate the same amount (1000 EUR) to some custom temporary account with VAT code BTW 21%. This line is necessary to claim the VAT refund of 210 EUR.
  3. On the third line, I have to reverse the amount on the temporary account and also reverse the VAT amount. Therefore I allocate -1000 EUR to the temporary account with VAT code 21% EU. I use another VAT code to make this amount visible on a report I print at the end of a quarter.

As a result, in sum only an amount of 1000 EUR without VAT is recorded as an expense. In addition, when printing the VAT overview, I get an overview of all the amounts to be filled in the three boxes.

I don’t know if this is the correct way to record this type of purchase invoices in Manager. If there is a better way to do this, then please let me know. But I hope this is helpful to others.

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