VAT scenarios
Several examples of the most common VAT situations are explained. Each example consists of a description of the situation, the applicable regulations and how to configure this situation in Profit.
Naturally, not all situations have been described. Most of the situations not described involve exceptions or further specifications.
Example 1 - Domestic sales
Scenario
Tom Aat BV trades in fruit and vegetables and on 1 October 2016 it will supply 10 boxes of apples to customer Jansen VOF at a price of € 25 per box. The invoice will be sent on 5 October 2016.
Regulation
Example 1 |
Domestic sales |
|---|---|
Who |
Tom Aat B.V. |
For what |
Supply of goods (apples) |
Where |
Domestic |
When |
5 October 2016 |
Tax |
The delivery of goods in the home market is taxed. |
Rate |
In the Netherlands, apples fall in the rate group ‘Low'. On 5 October 2016 the percentage for this rate group in the Netherlands will be 6%. |
To pay |
6% of 10 x 25.00 = 15.00 |
To claim |
- |
Invoice amount |
10 x 25.00 + 15.00 = 265.00 |
Configuration
Example 1 |
Domestic sales |
|
|---|---|---|
Administration |
Legislating country |
NL |
Debtor |
Name Country of registered office VAT duty |
Jansen VOF NL Domestic sales |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Sales Domestic Liable to VAT No |
Item |
Rate group Services calculation |
NL - Low No |
Rate |
Country Rate group Effective date Rate |
NL Layer 1-1-2001 6% |
VAT code |
Services calculation Calculation |
- Normal calculation |
VAT section |
Country Code |
NL 1b |
Example 2 – Sale of goods within the EU
Scenario
Tom Aat BV, based in the Netherlands, deals in fruits and vegetables and will deliver 10 bags of potatoes to purchaser PietFriet BVBA in Belgium at a price of € 25 per bag on 1 October 2016. The invoice will be sent on 5 October 2016.
Regulation
Example 2 |
Sale of goods within the EU |
|---|---|
Who |
Tom Aat B.V. |
For what |
Supply of goods (apples) |
Where |
Within the EU (Belgium) |
When |
5 October 2016 |
Tax |
VAT transfer is mandatory for deliveries of goods within the EU. |
Rate |
In cases of VAT transfer, VAT is neither calculated nor invoiced. |
To pay |
- |
To claim |
- |
Invoice amount |
10 x 25.00 = 250.00 |
Configuration
Example 2 |
Sale of goods within the EU |
|
|---|---|---|
Administration |
Legislating country |
NL |
Debtor |
Name Country of registered office VAT duty VAT number |
PietFriet BVBA BE Sales within the EU |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Sales Within the EU Transferred Yes |
Item |
Rate group Services calculation |
NL - Low No |
Rate |
Country Rate group Effective date Rate |
NL Zero 1-1-2001 0% |
VAT code |
Services calculation Calculation |
No Normal calculation |
VAT section |
Country Code |
NL 3b |
See Example 11 – Purchase within the EU for the configuration of the purchase side.
Example 3 – Sale of services within the EU
Scenario
Pet & Co veterinary office treats animals of cattle farmer Kalf in Belgium. The treatment takes 8 hours and will be performed at Kalf's premises in Belgium on 1 October 2016. Pet & Co's hourly rate is €125.00. Pet & Co invoices on 5 October for the service rendered.
This provision is included in the VAT and ICP declarations.
Regulation
Example 3 |
Sale of services within the EU |
|---|---|
Who |
Pet & Co |
For what |
Provision of services (treatment of animals) |
Where |
Within the EU (Belgium) |
When |
5 October 2016 |
Tax |
VAT transfer is mandatory for deliveries of goods within the EU. |
Rate |
In cases of VAT transfer, VAT is neither calculated nor invoiced. |
To pay |
- |
To claim |
- |
Invoice amount |
8 x 125.00 = 1000.00 |
Configuration
Example 3 |
Sale of services within the EU |
|
|---|---|---|
Administration |
Legislating country |
NL |
Debtor |
Name Country of registered office VAT duty VAT number |
cattle farmer Kalf BE Sales within the EU |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Sales Within the EU Transferred Yes |
Item |
Rate group Services calculation |
NL - High No |
Rate |
Country Rate group Effective date Rate |
NL Zero 1-10-2016 0% |
VAT code |
Services calculation Calculation |
Yes Normal calculation |
VAT section |
Country Code |
NL 3b |
Example 4 – Sale outside the EU
Scenario
Tom Aat BV, based in the Netherlands, deals in fruits and vegetables and will deliver 5000 kilos of cucumbers to purchaser Izmir in Turkey at a price of € 0.10 per kilo on 1 October 2016. The invoice will be sent on 5 October 2016.
Regulation
Example 4 |
Sale outside the EU |
|---|---|
Who |
Tom Aat BV |
For what |
Delivery of goods (cucumbers) |
Where |
Outside the EU (Turkey) |
When |
5 October 2016 |
Tax |
Provisions of services outside the EU are exempt. |
Rate |
In cases of exemption, 0% VAT is calculated and invoiced. |
To pay |
0.00 |
To claim |
- |
Invoice amount |
5000 x 0.10 = 500.00 |
Configuration
Example 4 |
Sale outside the EU |
|
|---|---|---|
Administration |
Legislating country |
NL |
Debtor |
Name Country of registered office VAT duty |
Izmir Turkey Export |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Sales Outside the EU Exempt No |
Item |
Rate group Services calculation |
NL - Low No |
Rate |
Country Rate group Effective date Rate |
NL Layer 1-1-2001 6% |
VAT code |
Services calculation Calculation |
- Normal calculation |
VAT section |
Country Code |
NL 3a |
Example 5 – % sale
Scenario
Oysterer Van Grevelingen VOF, based in the Netherlands, delivers 6000 kg of mussels to the Mosselveiling Yerseke for a price of €1.20 per kilo. The delivery will take place on 1 October 2016 and will be invoiced on 5 October 2016.
Regulation
Example 5 |
0% sale |
|---|---|
Who |
Van Grevelingen VOF |
For what |
Delivery of goods (mussels) |
Where |
Domestic |
When |
5 October 2016 |
Tax |
The delivery of fish, crustaceans, shellfish or molluscs by a fisher to an auction house is subject to a rate of 0% in the Netherlands. |
Rate |
0% VAT is charged. |
To pay |
0.00 |
To claim |
- |
Invoice amount |
5000 x 1.20 = 6000.00 |
Configuration
Example 5 |
0% sale |
|
|---|---|---|
Administration |
Legislating country |
NL |
Debtor |
Name Country of registered office VAT duty |
Mosselveiling Yerseke NL Domestic sales |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Sales Domestic Liable to VAT No |
Item |
Rate group Services calculation |
NL - Zero No |
Rate |
Country Rate group Effective date Rate |
NL Zero 1-10-2016 0% |
VAT code |
Services calculation Calculation |
- Normal calculation |
VAT section |
Country Code |
NL 1e |
Example 6 – Exempt sale
Scenario
Tom Aat Groothandel BV, based in the Netherlands, sells a transit warehouse to moving company Snelle Jelle BV for the sum of €200,000.00. This amount will be invoiced on 5 October 2016.
Regulation
Example 6 |
Exempt sale |
|---|---|
Who |
Tom Aat Groothandel BV |
For what |
Provision of immovable goods (transit warehouse) |
Where |
Domestic |
When |
5 October 2016 |
Tax |
The sale of immovable goods is exempt from VAT in the Netherlands. In this example, we do not select taxed provision or use the agriculture arrangement. |
Rate |
VAT is neither calculated nor invoiced. |
To pay |
- |
To claim |
- |
Invoice amount |
200,000.00 |
Configuration
Example 6 |
Exempt sale |
|
|---|---|---|
Administration |
Legislating country |
NL |
Debtor |
Name Country of registered office VAT duty |
Snelle Jelle BV NL Exempt |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Sales Domestic Exempt No |
VAT code |
Services calculation Calculation |
- - |
VAT section |
Country Code |
NL 1e |
Example 7 – Transferred sale
Scenario
Painting company Kwast BV, based in the Netherlands, paints a home under contract from contractor Bouw Totaal BV for an agreed price of €5,800.00. Kwast BV will invoice this amount on 5 October 2016.
Regulation
Example 7 |
Transferred sale |
|---|---|
Who |
Kwast BV |
For what |
Provision of services (house painting) |
Where |
Domestic |
When |
5 October 2016 |
Tax |
In cases of subcontracting of work or hiring of personnel in the construction sector, the VAT transfer arrangement applies in the Netherlands The VAT liability is transferred from the subcontractor or agency to the main contractor or user enterprise. |
Rate |
In cases of VAT transfer, VAT is neither calculated nor invoiced. |
To pay |
- |
To claim |
- |
Invoice amount |
5,800.00 |
Configuration
Example 7 |
Transferred sale |
|
|---|---|---|
Administration |
Legislating country |
NL |
Debtor |
Name Country of registered office VAT duty |
Bouw Totaal BV NL Transferred to |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Sales Domestic Transferred No |
VAT code |
Services calculation Calculation |
- Normal calculation |
VAT section |
Country Code |
NL 1e |
See also:
Example 8 – Intercompany sale
Scenario
The Tom Aat Group consists of Tom Aat Groothandel BV and Tom Aat Holding. Tom Aat Holding sends an invoice to charge software licences over to Tom Aat Groothandel BV in the amount of €40,000.00. The invoice will be sent on 5 October 2016.
Regulation
Example 8 |
Intercompany sale |
|---|---|
Who |
Tom Aat Holding |
For what |
Provision of services (software licences) |
Where |
Domestic |
When |
5 October 2016 |
Tax |
Tom Aat Group is a fiscal unit for VAT, and therefore VAT must be paid at the group level. Consequently, no VAT is due on this internal transaction. |
Rate |
No VAT is invoiced. |
To pay |
- |
To claim |
- |
Invoice amount |
40,000.00 |
Configuration
Example 8 |
Intercompany sale |
|
|---|---|---|
Administration |
Legislating country |
NL |
Debtor |
Name Country of registered office VAT duty |
Tom Aat Groothandel NL No VAT |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Sales Not applicable No VAT (intercompany) No |
VAT code |
Services calculation Calculation |
- - |
Example 9 – Telesales
Scenario
Yacht builder Riviera Yachts, based in the Netherlands, sells a yacht to a wealthy Italian individual, Mr Riccone. The yacht is sold for € 37,500 and will be invoiced by Riviera Yachts on 5 October 2016.
Regulation
Example 9 |
Telesales |
|---|---|
Who |
Riviera Yachts |
For what |
Delivery of goods (yacht) |
Where |
Within the EU (Italy) |
When |
5 October 2016 |
Tax |
To prevent customers who do not make VAT declarations, such as private individuals, buying goods in bulk in the EU country with the lowest VAT rate, the arrangement for 'telesales' applies within the EU. This means that the provider charges the VAT rate for the EU country of the purchaser. This VAT must be reported and paid to the tax authority in the purchaser's country. |
Rate |
In Italy, yachts fall under the 'High' rate group. On 5 October 2016 the percentage for this rate group in Italy is 20%. |
To pay |
20% of 37,500.00 = 7,500.00 (payable to the Italian tax authority) |
To claim |
- |
Invoice amount |
37,500.00 + 7,500.00 = 45,000.00 |
Configuration
Example 9 |
Telesales |
|
|---|---|---|
Administration |
Legislating country |
NL |
Debtor |
Name Country of registered office VAT duty |
Mr. Riccone Italy Telesales |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable Foreign rate |
Sales Within the EU Liable to VAT No Yes |
Item |
Rate group Services calculation |
Italy - High No |
Rate |
Country Rate group Effective date Rate |
Italy High 01/10/1997 20% |
VAT code |
Services calculation Calculation Rate country Rate group |
- Normal calculation Italy High |
VAT section |
Country |
Italy This means a declaration must be made in Italy. This can be done by creating an Italian section and linking the aforementioned VAT code to it. By means of a view, analysis or report, you can display the sum to be paid and make the declaration. |
Example 10 – Domestic purchase
Scenario
Tom Aat BV, based in the Netherlands, deals in fruits and vegetables and will buy 5000 kilos of cucumbers from grower West Land VOF at a price of € 0.05 per kilo on 1 October 2016. The invoice will be received on 5 October 2016.
Regulation
Example 10 |
Domestic purchase |
|---|---|
Who |
Tom Aat BV |
For what |
Acquisition of goods (cucumbers) |
Where |
Domestic |
When |
5 October 2016 |
Tax |
Domestic acquisition of goods is taxed. |
Rate |
In the Netherlands, cucumbers fall under the 'Low' rate group. On 5 October 2016 the percentage for this rate group in the Netherlands will be 6%. |
To pay |
- |
To claim |
6% of 5000 x 0.05 = 15.00 |
Invoice amount |
5000 x 0.05 + 15.00 = 265.00 |
Configuration
Example 10 |
Domestic purchase |
|
|---|---|---|
Administration |
Legislating country |
NL |
Creditor |
Name Country of registered office VAT duty |
West Land VOF NL Domestic purchase |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Purchase Domestic Liable to VAT No |
Item |
Rate group Services calculation |
NL - Low No |
Rate |
Country Rate group Effective date Rate |
NL Layer 1-1-2001 6% |
VAT code |
Services calculation Calculation |
- Normal calculation |
VAT section |
Country |
NL 5b |
Example 11 – Sale within the EU
Scenario
Tom Aat BV, based in the Netherlands, deals in fruits and vegetables and buys 600 crates of oranges from grower Clementine in Portugal. The oranges cost Tom Aat BV 3.50 Euros a crate. The invoice will be received on 5 October 2016.
Regulation
Example 11 |
Purchase within the EU |
|---|---|
Who |
Tom Aat B.V. |
For what |
Acquisition of goods (oranges) |
Where |
Within the EU (Portugal) |
When |
5 October 2016 |
Tax |
The acquisition of goods originating from another EU member state is known as an 'intra-community acquisition'. An intra-community acquisition of goods is taxed in the country of delivery, but at the same time is also deductible as input tax. |
Rate |
In the Netherlands, oranges fall under the 'Low' rate group. On 5 October 2016 the percentage for this rate group in the Netherlands will be 6%. |
To pay |
6% of 600 x 3.50 = 126.00 |
To claim |
6% of 600 x 3.50 = 126.00 |
Invoice amount |
In this case, the supplier makes what is known as an 'intra-community delivery'. For intra-community deliveries, VAT is transferred to the purchaser. Therefore, Clementine does not charge Tom Aat BV any turnover tax. 600 x 3.50 = 2100.00 |
Configuration
Example 11 |
Purchase within the EU |
|
|---|---|---|
Administration |
Legislating country |
NL |
Creditor |
Name Country of registered office VAT duty |
Clementine Portugal Purchase within the EU |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Purchase Within the EU VAT transferred Yes |
Item |
Rate group Services calculation |
NL - Low No |
Rate |
Country Rate group Effective date Rate |
NL Layer 1-1-2001 6% |
VAT code |
Services calculation Calculation |
No Normal calculation For Transferred from, the Normal calculation is always selected as the calculation method. Of course, in the case of Transferred from, from Order Management the calculation uses 0% and the VAT amount is only calculated when the VAT declaration is prepared. If the VAT duty is set to 3 = Purchase within EU or 4 = Import outside EU in the VAT code, then the VAT amount only appears on the declaration in section 4a and is deducted again from the input tax. Nothing is entered on the linked ledger accounts in the VAT code. |
VAT section |
Country |
NL 4b |
Example 12 – Purchase outside the EU
Scenario
Yacht builder Riviera Yachts, based in the Netherlands, buys a navigation system from Norwegian company SeaSensor AB for a sum of €6500.00. The system is delivered by SeaSensor AB via Schiphol airport. The invoice will be received on 5 October 2016.
Regulation
Example 12 |
Purchase outside the EU |
|---|---|
Who |
Riviera Yachts |
For what |
Acquisition of goods (navigation system) |
Where |
Outside the EU (Norway) |
When |
5 October 2016 |
Tax |
Goods imported from outside the EU are taxed in the country where the goods enter the EU. However, this tax is also deductible as input tax. |
Rate |
In the Netherlands, navigation systems fall under the 'High' rate group. On 5 October 2016 the percentage for this rate group in the Netherlands will be 21%. |
To pay |
21% van 6,500.00 = 1,365.00 |
To claim |
21% van 6,500.00 = 1,365.00 |
Invoice amount |
In this case, the supplier is exporting to an EU member state. For this, VAT is transferred to the purchaser. Therefore, SeaSensor AB does not charge Riviera Yachts any turnover tax. 6,500.00 |
Configuration
Example 12 |
Purchase outside the EU |
|
|---|---|---|
Administration |
Legislating country |
NL |
Creditor |
Name Country of registered office VAT duty |
SeaSensor AB Norway Import |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Purchase Outside the EU Transferred Yes |
Item |
Rate group Services calculation |
NL - High No |
Rate |
Country Rate group Effective date Rate |
NL High 1-10-2016 21% |
VAT code |
Services calculation Calculation |
No Normal calculation For Transferred from, the Normal calculation is always selected as the calculation method. Of course, in the case of Transferred from, from Order Management the calculation uses 0% and the VAT amount is only calculated when the VAT declaration is prepared. If the VAT duty is set to 3 = Purchase within EU or 4 = Import outside EU in the VAT code, then the VAT amount only appears on the declaration in section 4a and is deducted again from the input tax. Nothing is entered on the linked ledger accounts in the VAT code. |
VAT section |
Country |
NL 4a |
Example 13 – Exempt purchase
Scenario
Tom Aat BV, based in the Netherlands, will receive an invoice from TNT Post on 5 October 2016 for the carriage credit used for the postage machine in the first half of 2016 in the amount of €520.00.
Regulation
Example 13 |
Exempt purchase |
|---|---|
Who |
Tom Aat BV |
For what |
Acquisition of services (postage) |
Where |
Domestic |
When |
5 October 2016 |
Tax |
Public services, including postage, are exempt from VAT in the Netherlands. |
Rate |
VAT is neither calculated nor invoiced. |
To pay |
- |
To claim |
- |
Invoice amount |
520.00 |
Configuration
Example 13 |
Exempt purchase |
|
|---|---|---|
Administration |
Legislating country |
NL |
Creditor |
Name Country of registered office VAT duty |
TNT Post NL Exempt |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Purchase Domestic Exempt No |
VAT code |
Services calculation Calculation |
- - |
VAT section |
Country |
NL 5b |
Example 14 – Transferred purchase
Scenario
Yacht builder Riviera Yachts, based in the Netherlands, hires on freelance provider Van Stoffelen upholstery to upholster a motor yacht being built by Riviera Yachts under contract. On 5 October, Van Stoffelen invoices for 40 hours of work at an hourly rate of €35.00.
Regulation
Example 14 |
Transferred purchase |
|---|---|
Who |
Riviera Yachts |
For what |
Acquisition of services (upholstery) |
Where |
Domestic |
When |
5 October 2016 |
Tax |
In cases of subcontracting of work or hiring of personnel in the shipbuilding sector, the VAT transfer arrangement applies in the Netherlands The VAT liability is transferred from the subcontractor or agency to the main contractor or user enterprise. |
Rate |
In cases of VAT transfer, VAT is neither calculated nor invoiced. |
To pay |
- |
To claim |
- |
Invoice amount |
40 x 35.00 = 1,400.00 |
Configuration
Example 14 |
Transferred purchase |
|
|---|---|---|
Administration |
Legislating country |
NL |
Creditor |
Name Country of registered office VAT duty |
Van Stoffelen upholstery NL Transferred |
VAT duty |
Purchasing / Sales Transaction Tax Services calculation applicable |
Purchase Domestic Transferred No |
Item |
Rate group Services calculation |
NL - High - |
Rate |
Country Rate group Effective date Rate |
NL High 1-10-2016 21% |
VAT code |
Services calculation Calculation |
- - |
VAT section |
Country |
NL 2a |
See also:
Example 15 – Purchase of excluded services
Scenario
A member of the sales team at yacht builder Riviera Yachts, based in the Netherlands, takes part in a water sports convention organised by the firm Shipyard Exhibition in London. On 5 October, an invoice of €140.00 is received for the ticket.
Regulation
Example 15 |
Purchase of excluded services |
|---|---|
Who |
Riviera Yachts |
For what |
Acquisition of services (participation in convention) |
Where |
Within the EU (Great Britain) |
When |
5 October 2016 |
Tax |
In the Netherlands, the VAT on participation in a trade show or convention in an EU country must be paid in that country. Therefore, an invoice with foreign VAT is received. This VAT cannot be reported on the turnover tax declaration. This VAT can be claimed by the foreign tax authority. Therefore, in this example, the company is subject to VAT abroad. |
Rate |
The foreign country's rate applies here. In Great Britain, participation in a convention falls under the 'Standard rate' group. On 5 October 2016 the percentage for this rate group in Great Britain will be 17.5%. |
To pay |
17.5% of 140.00 = 24.50 |
To claim |
- |
Invoice amount |
140.00 + 24.50 = 164.50 |
Configuration
Example 15 |
Purchase of excluded services |
|
|---|---|---|
Administration |
Legislating country |
NL |
Creditor |
Name Country of registered office VAT duty |
Shipyard Exhibition GB Purchase within the EU (excluded services) |
VAT duty |
Purchasing / Sales Transaction Tax Foreign rate Services calculation applicable |
Purchase Within the EU Liable to VAT Yes No |
Item |
Rate group Services calculation |
GB – Standard rate - |
Rate |
Country Rate group Effective date Rate |
GB Standard rate 01/01/2010 17.5% |
VAT code |
Services calculation Calculation |
- Normal calculation |
VAT section |
Country |
UK |