How SimplyVAT Helped Prevent a €7,000 Mistake

Our client is a manufacturing components distributor based in the Netherlands. They sell their products to businesses all over Europe. Over the year and half they’ve been working with SimplyVAT, we’ve helped them navigate the VAT on large wholesale orders to customers in multiple countries. 

Business-to-Business VAT Support 

Selling your products across international borders is complicated enough, without worrying about the VAT treatment of a transaction. For B2B sellers, the complexity and the risk increase, as the sale value and VAT liability scales up. 

For our client, the amount in question was €7,000 – a large VAT liability on a sale to a customer in Belgium. The Belgian company had sent them a Purchase Order. In the breakdown of the price, they had added the local VAT rate for the product and calculated the VAT liability.  

Our client was unsure whether they would have to charge the VAT in this case. They tuned to Senior Client Manager, Gustavo Curioso, for advice. Gustavo explained that because Belgium has the Domestic Reverse Charge rule, the client shouldn’t charge their customer the VAT. Instead, the Belgian business should declare and reclaim the VAT on their own VAT return. He also sends the client an extract from Article 51 of the Belgian VAT code for them to reference if they need it. 

Domestic Reverse Charge 

Whilst they are based in the Netherlands, our client is VAT registered in three additional countries. To make sure the invoice they will issue for their Belgian customer is correct, they confirm with Gustavo which VAT number they should list. 

In the meantime, our client talks to a peer in their industry and comes away from the conversation worried. They store stock in Belgium from which they fulfil local orders and consequently have a Belgian VAT number. Their peer had told them that because of this, Belgian customs would consider their business to be local, not non-established. This leaves our client concerned that the Belgian Customs Authority will require them to pay the VAT on this order plus a fine for not having charged it in the first place. Their customer then adds pressure by saying that they believe our client should be charging them the VAT. 

They get back in touch with Gustavo, who reassures them that this isn’t the case. He explains two key mistakes in their customer and peer’s understanding: 

• First, that the VAT on this transaction is domestic, as both the goods and the customer are in Belgium. Therefore, Belgian customs wouldn’t be involved.
• Second, that storing goods or working with a logistics partner in Belgium isn’t enough to consider a business “established” in Belgium. 

For additional reassurance and information, Gustavo provides our client with a draft of an email they can send to the Belgian Tax Authority. The Tax Authority responds confirming Gustavo’s information which gives our client evidence to forward to their customer. 

Confidence and Clarity 

Cross-border VAT is complicated. Even in the European Union, the rules vary by country. Knowing you have an expert to turn to when you have questions can bring you peace of mind. With help from Gustavo, our client: 

• Correctly issued a zero-VAT invoice, allowing their customer to use domestic reverse charge
• Avoided incorrectly charging their customer €7,000 in VAT 

By issuing the invoice correctly four potential problems (and a lot of admin work) have been avoided:

1. The Belgian Tax Authority rejecting the customer's input VAT deduction.
2. The customer having to repay the wrongly deducted VAT with interest (and potentially fines or penalties)
3. Our client having to reissue the invoice and both them and their customer having to file corrections
4. An increase in the likelihood of both parties facing a VAT audit.