Are balance sheet amounts including or excluding VAT?
That differs per item. Accounts receivable and payable usually include VAT. Deductible VAT is shown separately from costs and investments.
The short answer
That differs per item. Accounts receivable and payable usually include VAT. Deductible VAT is shown separately from costs and investments.
Basis: art. 2:362 and 2:375 DCC; conditions for deduction of input VAT
How does the balance sheet show VAT on sales?
There is no rule that the whole balance sheet is including or excluding VAT. The balance sheet shows different kinds of rights and obligations. A customer usually has to pay the full invoice amount, while deductible input VAT forms a separate tax position. So look per item at the nature of the amount and its deductibility.
Take a simple worked example without any special VAT scheme. With a sales invoice of € 1.000 plus € 210 VAT, there is a receivable from the customer of € 1.210 against turnover of € 1.000 and VAT payable of € 210. If the invoice is still unpaid at the balance sheet date, the full amount stays in accounts receivable. The VAT may already have been processed in a return. So do not compare only invoice totals with the turnover account. A difference caused by VAT is then perfectly logical. Do check that the VAT account reconciles with returns, payments and any corrections.
When is input VAT deductible?
For a purchase invoice you assess whether the VAT is deductible. The Belastingdienst (the Dutch Tax Administration) sets conditions for this, including use for taxable activities and in principle a suitable invoice. With full deduction, costs or an investment are usually processed without that deductible VAT, while the liability to the supplier includes the total invoice amount. Non-deductible VAT can instead be part of the costs or the acquisition price. Exempt activities, mixed use and special schemes can change the outcome. So do not automatically apply the same split to every purchase just because the bookkeeping package proposes it.
Prepare a VAT reconciliation at year-end. Start with the VAT balances in the books and explain which returns are still to be paid or received. Investigate differences due to private use, earlier periods or wrong entries. Art. 2:362 DCC requires a true and fair view and art. 2:375 DCC deals, among other things, with tax liabilities, with applicable simplifications per regime. A large difference may not be written off unnoticed as other costs. Establish whether a correction in the records, a supplementary return or both is needed. Use the current tax rules of the Belastingdienst for this.
How do you make a VAT reconciliation?
With imports, check whether amounts are supplied including or excluding VAT and whether the reporting package does not interpret gross invoice amounts as turnover. Also include open credit notes and payments around the balance sheet date. For a DGA it is mainly important that bank balance, profit and VAT payable are different quantities. A large invoice amount received is not entirely freely spendable profit. Keep the VAT reconciliation with the final returns and proof of payment. That lets a bookkeeper or accountant later understand why the liability position at the balance sheet date differs from the amount of the last VAT return filed.
Sources
Frequently asked questions
Is a sales receivable shown including VAT on the balance sheet?
The open invoice receivable usually includes the amount the customer must pay; the VAT liability is shown separately.
Are purchases always excluding VAT?
Only deductible input VAT is processed separately; non-deductible VAT can be part of the costs.
Why can the VAT balance differ from the return?
Check timing differences, corrections and invoices not yet processed.
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