In this contribution we inform you in collaboration with Accounting Office Fiscam B.V. on the increase of the VAT of 19% to 21% on 1 October 2012. This information is compiled on the basis of the information that was available to us by the government. Depending on your own situation and advancing insights this information might not, no longer or only partially be applicable.
More information on the VAT increase in combination with Invantive Estate and Invantive Vision
VAT increase of 19% to 21%
The increase of the VAT of 19% to 21% has consequences for every entrepreneur. The administration will need to be adjusted, the rate change can influence the invoicing and the pricing and this means a higher expense for companies that do not have complete right to deduct.
Recently the Ministry of Finance has published a Q&A decree, in which a number of approvals are granted and more clarity was given on amongst others the coverage of the transitional arrangements fir the newly build real estate and renovated real estate. We present the most important matters one by one.
Implementation rate at the VAT increase at 1 October 2012
The time of the delivery or service is decisive for the VAT rate that is applicable. A delivery or service that is supplied before 1 October 2012 is taxed with 19% VAT. A delivery or service that is supplied on or after 1 October 2012 is taxed with 21% VAT. The moment of invoicing is not important.
Example 1: an entrepreneur delivers a fridge to a client on 29 September 2012 and sends him an invoice on 4 October 2012. The delivery is taxed with 19%.
Example 2: an individual orders an iPad on 28 September 2012 through the internet and pays the complete purchase price the same day. The iPad is delivered on 3 October 2012. The delivery is taxed with 21% VAT.
The secretary of state has already approved that entrepreneurs can already invoice with 21% before 1 October 2012, if it concerns activities that take place on or after 1 October 2012. This prevents that entrepreneurs that invoice in advance, have to send additional invoices for the difference between 19% and 21% VAT for activities that are done on or after 1 October 2012. The entrepreneur that performs the activity is allowed to deduct that 21% VAT conform the rules that govern deduction.
If people make use of this approval the turnover, invoiced with 21% VAT, needs to be specified in the sales tax return in section 1c. Should this be problematic for the entrepreneur, he can also choose to specify this turnover with question 1a.
At the start of 1 October 2012 the general VAT rate of 21% in section 1a of the declaration form should be indicated.
Have you already sent an invoice with 19% VAT, while the time of the delivery/service takes place after 30 September 2012, then you owe the difference between 19% and 21% to the tax authorities on 1 October 2012. You will need to remit the difference of 2% in the declaration of October 2012 or the fourth quarter of 2012.
Ongoing activities and the VAT increase
Some activities run on longer, for example the granting of licenses, subscriptions on deliveries of for example gas, electricity and water and telecommunication services. The billing period needs to be spliced if the billing concerns the period that ends after 30 September 2012. For the part of the activities that took place before 1 October the old rate of 19% applies. For the part of the activities that took place on or after 1 October 2012 the new rate of 21% applies.
If these ongoing activities are directed to entrepreneurs and legal entities than it is required to hand out an additional invoice with 21% VAT.
Maintenance and service subscriptions and the VAT increase
In maintenance and service subscriptions it is the moment on which a maintenance service is completed that determines the applicable VAT rate. It does not matter in which way the compensation is payed: before, in terms or afterwards. If the maintenance service takes place after 30 September 2012, while the payment of the subscription already take place for 19% (such as for example at the start of the year), then hte difference of 2% VAT is still due after the maintenance service took place.
Real estate and constructions and the VAT increase
The moment a real estate is supplied and the moment a service is executed determine the applicable rate. For the delivery of real estate and renovations there a number of transitional arrangements.
Purchase real estate before 1 October 2012 and the VAT
If real estate or structure is supplied after 30 September on the basis of an agreement closed before 1 October 2012, where the compensation expires in terms, then the 19% rate still applies to the terms that expired befóre 1 October 2012. On the terms that expire on or after 1 October 2012 the VAT rate of 21% applies.
Purchase newly built house before 28 April 2012 and the VAT
If an agreement was made before 28 April 2012 on the delivery of a newly built house, that takes place after 30 September 2012, and where the compensation expires in terms, then the 19% rate applies to all terms before 1 October 2013. Buildings that are partially used as residence and partially as business premises, can be specified completely as residence, as long as the building is used for more than 50% for private residence. If these conditions are not met, then the transitional arrangements is only applicable on the housing part.
$ Agreed renovations and the new VAT percentage
If a renovation was agreed upon separately, where the compensation expires in terms as the renovation progresses, then the 19% rate applies on the terms that have expired before 1 October 2012. On the terms that expire on or after 1 October 2012 the VAT rate of 21% applies. The renovation does need to aimed at a change of decoration, nature or the size of the real estate. Think for example on the placement of a kitchen, bathroom, conservatory or dormer. The approval does ot count for renovations comprising the performance of maintenance or repair activities, for example the replacement of windows, gutters and roofing.
Adjustment administration for the VAT increase
You will need to adjust the administration in time to the VAT increase. On the sales invoices the correct VAT rate needs to be mentioned. You also need to peruse the purchase invoices from the past to see if there are any deliveries that run on after 1 October, such as for example maintenance or subscriptions. You will also receive your purchase invoices with 21% VAT. To correctly post the purchase and sales invoices with the new rate, you might wish to (temporarily) use new general ledger accounts in the accounting package. Your accountant can support you here, but you can also contact Accounting Office Fiscam B.V.