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Level 1

VAT TAX - Balance Sheet Presentation

Hello -

We started a new company located in the Netherlands in Q1 2019.  The new company is a subsidiary of our parent company, which is in the United States. Our other companies are on QB Enterprise.  I am a new QBO plus the added bonus of it being an international company. I understand the basic concepts of VAT Tax. Input VAT is the value added tax added to the price you pay for eligible goods or services. Output VAT is the value added tax that you calculate and charge on your own sales of goods and services. I need help understanding the following about the three VAT accounts in the liability section of the Balance Sheet: VAT Refunds Received, BTW Hoog Payable, and BTW inkoop hoog Payable. 

 

  1. BTW Hoog Payable - monies we collected from a customer for the sale of product. We owe the Dutch Tax Department the money.
  2. BTW inkoop hoog Payable - monies we paid tax for goods and services. We are owed a refund (see #3 below).  Why are these amounts classified as a liability? They should be classified as an asset since they are a debit balance. The account should be BTW inkoop hoog Receivable. Can you change this on QBO? 
  3. VAT Refunds Received - monies we received as a refund from the Dutch Tax Department. Why is the refund recorded to this account instead of the BTW inkoop hoog Payable account? Can we control this via QBO?

Basically, I am confused as to the function of recording VAT on QBO. Are these accounts system created that we cannot

modify? I understand the concept of input and output; however, I do not understand how they interact when filing the VAT return. I feel that I am missing a piece of the puzzle to understand how these accounts interact under Dutch tax law.

 

Thank you in advance for your help.

 

5 Comments
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QuickBooks Team

VAT TAX - Balance Sheet Presentation

Let me help you record your VAT in QuickBooks Online, @KEW13.

 

To start with, let's talk about how does the how Dutch VAT works. The Dutch value-added tax ( spelled in Netherlands as "BTW") is a general consumption tax, which is supposed to be ultimately born by the consumer. The VAT is included in the retail price of basically all goods and services.

 

In general, the VAT must be included in the invoice issued by the supplier of goods or services.

 

On the other hand, VAT Refunds Received are VAT paid in which you can reclaim for goods and services you've purchased for use in your business. If a purchase is also for personal or private use, you can only reclaim the business proportion of the VAT.

 

Here's an example: You work from home and your office takes up 20% of the floor space in your house. You can reclaim 20% of the VAT on your utility bills.

 

We treat these transactions as a liability since your company is paying for it even though these purchases are reclaimable. You must keep these records to support your claim and show how you arrived at the business proportion for a purchase.

 

There's no option we can modify this in QuickBooks at the moment. I'll share this thread with our product engineers for further review.

 

I'm always here to help if you have any other concerns or questions. Just tag my name in the comment section and I'll get back to you as soon as I can.

Highlighted
Level 1

VAT TAX - Balance Sheet Presentation

Thank you for the quick reply to my email. Per your response, I have additional questions:

 

Note - this company was formed in March 2019 so it is a startup company, which creates an unique situation. In Q1, Q2 and Q3, we only had Input VAT. This is why we received a refund for each quarter. In Q4, we have Input VAT and Output VAT, which will net on the VAT return.

 

  1. Does QBO for the Netherlands automatically create the two accounts, BTW Hoog Payable and BTW inkoop hoog Payable, once VAT is selected in the tax center? 
  2. Can we modify and/or change these accounts names and classification?
  3. Do we need to consolidate the two accounts at month end into one VAT Control Account?
  4. How do you apply a refund or payment from the HRMC?

Basically, I have three accounts with balances in them at year end. We received a refund from the HRMC for Q2 and Q3. Why would you not apply it to the BTW inkoop hoog Payable account? 

 

I am confused with the proper accounting presentation on the Balance Sheet.  See below

 

Current Liabilities

 

1) VAT Refunds Received - 21,040

 

2) BTW Hoog Payable - 7,055

 

3) BTW inkoop hoog Payable - (33,978)

 

 

Highlighted
Moderator

VAT TAX - Balance Sheet Presentation

Hello again, KEW13. Thanks for the details.

 

The answer is Yes on your 1st question. Since the accounts in QuickBooks Online are in default. 

 

However, for the 2nd question is a No with the same explanation on the 1st question. 

 

For the 3rd question, it's not necessarily since QBO will follow the amounts posted in each box when filing the return. 

 

As for the last question, you can create an Adjustment.  I can help walk you through on how to record a VAT refund from HRMC in QuickBooks Online (QBO). 

 

Here's how:

 

  1. Go to Taxes and click on the arrow next to View Return for the specific VAT period you need.
  2. Select Record Refund.
  3. At the top, select the bank account the refund has gone into.
  4. Make sure you've selected Refund under Payment Type.
  5. Enter the Refund date and amount.
  6. Add a memo if needed.
  7. Click Save.

But before doing so, I'd recommend contacting your account first for guidance in handling your VAT return and the adjustment itself.

 

You can read through this article to learn more about VAT and other related tasks.

 

If there's anything else I can do for you, let me know by commenting below. I'd be happy to further assist you. Have a great day. 

Highlighted
Level 1

VAT TAX - Balance Sheet Presentation

We went through the steps of filing the return and applying the payment on QBO. Another question on how to handle adjustments? The VAT Suspense account has a balance of 0.25, which is due to rounding from the refund versus the amount calculated on the invoices. We are unable to delete and redo the filing - can you add an adjustment after the fact?

Highlighted
QuickBooks Team

VAT TAX - Balance Sheet Presentation

Hi KEW13, 

 

You can set up an expense account if you want to increase your sales tax due, or an income account to decrease it. Let me walk you through the steps.

  1. Click Taxes on the left menu, then go to the Sales Tax tab.
  2. Find the tax period you need to adjust, and then select View return.
  3. Select Add an adjustment.
  4. Select the Reason for the adjustment.
  5. Select the Account for adjusting sales tax.
    • Choose an expense account if you need to increase the tax due.
    • Choose an income account if you need to decrease the tax due.
  6. Enter the adjustment amount, and then click Add.

Please check this article for detailed steps: Create or Delete a Sales Tax Adjustment.

 

You'll want to run reports in QuickBooks Online to focus on the aspects that you want to show: Run Reports in QuickBooks Online.

 

Let me know if you need further assistance. I'll always be right here to help.

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