Some practical VAT examples
VAT is not a simple matter. It is the tax par excellence where entrepreneurs are regularly confronted with unexpected and unpleasant surprises. And once errors are identified as a result of a VAT inspection, unfortunately all kinds of fines and default interest are imposed on top of the payment of arrears of VAT.
To give just a few practical examples that we have come across recently:
- A manufacturer in the pharmaceutical industry sells wound care ointment to a wholesaler and applies the reduced VAT rate of 6%. However, the ointment does not appear to meet the conditions of the specific administrative guidelines, with the result that the VAT authorities charge an additional 15% VAT after an inspection, as well as imposing fines and interest.
In addition, there is the commercial inconvenience of possible corrections of the invoicing to the wholesaler.
- A company specialises in the supply and installation of central heating and air conditioning. It wrongly applies the reverse charge mechanism to some customers as they do not appear to have an active VAT number and do not appear to submit regular VAT returns. The VAT authorities establish this and reclaim VAT, together with fines and default interest.
- A manufacturer of toys supplies goods from Belgium to several wholesalers located in other Member States and invoices these sales as exempt intra-Community supplies. Following a VAT inspection, however, it cannot be conclusively proven that the goods were actually transported to these Member States. The VAT authorities refuse to apply the VAT exemption and also claim a fine and default interest.
- A foreign company with a Belgian VAT number carries out a local supply of goods in Belgium to a Belgian company that submits regular VAT returns. The foreign company charges Belgian VAT on this, while the reverse charge mechanism should have been applied. The VAT authorities state that the VAT has been incorrectly charged and is therefore not deductible for the Belgian company.
The above examples are just a few simple cases where things went wrong. However, complex Belgian VAT legislation contains many more pitfalls. It is therefore very important for the entrepreneur to avoid these kinds of surprises.
In that context, we have developed a VAT scan to screen companies and preventively detect potential risks in the area of VAT.
When irregularities are detected preventively, they can also be corrected preventively (before any VAT inspection) and adverse consequences can usually still be successfully remedied.
In addition, a VAT scan can also identify a number of opportunities for optimisation that can have a direct impact on a company’s performance.
We aim for an integrated, structured and personal approach.
- 1st phase: live interview
With a VAT scan, we firstly schedule an interview with someone who is well acquainted with the company’s in-house accounting and finances. We always try to do this in the best possible way so that the time spent can be limited to a limited number of hours.
Based on various questions, we try to map out the VAT position of the company in detail and to quickly identify any risks. We have the knowledge and expertise to quickly turn to potential pitfalls, depending on the specific sector in which the company operates. We also try to look at various documents during the interview (invoices, etc.).
- 2nd phase: diagnosis
In the second phase we start working with the information obtained. We compile an overview for you together with our findings. A clear diagnosis in which:
- potential risks are clearly formulated and the necessary solutions are provided
- and potential opportunities are also brought to light
In short, a clear and efficient way of working that is very results-oriented.
We strongly believe in a proactive approach in order to avoid unpleasant surprises. We are happy to offer you the necessary support in this regard.