VAT, like payroll tax, is a self-assessed tax. This means that, as a business owner, you are responsible for ensuring that the correct amounts of VAT are declared and paid on time.
Supplementary tax return
Of course, it is human to make mistakes. But when it comes to input VAT, it is important to avoid mistakes as much as possible. This is because if the tax authorities discover any errors, an administrative fine is often imposed. Business owners usually find these fines to be high. The fine can easily amount to 25% of the VAT to be collected.
If you discover an error in the VAT returns you have submitted, you must correct it immediately. The law requires you to active reporting obligation . The penalty for this is a late payment fine, which is imposed in addition to the fine for underpayment of VAT. You can fulfil your active reporting obligation as follows:
- by means of a supplementary return;
- If the amount to be corrected is €1,000 or less, you may include the correction in your next VAT return.
You can submit a supplementary VAT return electronically via your personal domain on the Tax and Customs Administration’s website. You will then log in using the same username and password that you use to complete and submit your VAT returns via the Tax and Customs Administration’s website (not with your DigiD).
Alternatively, you can use the form provided by the Tax and Customs Administration for the supplementary VAT return form. You can complete this form on your computer, but it must be submitted in paper form to the Tax and Customs Administration in Heerlen. If the supplementary return results in an amount due, you must wait to make the payment until the Tax and Customs Administration has issued you with the additional tax assessment.
Apart from the fact that by submitting the supplementary return you are fulfilling your active reporting obligation, the supplementary return has no formal status. The Tax and Customs Administration processes the supplementary return as a request to:
- to issue a VAT additional assessment or (where an amount is payable);
- VAT refund (where a credit is due).
Before 1 April
As mentioned above, you must correct any incorrect VAT returns immediately after discovering the error(s), regardless of whether this is before or after 1 April. However, if you submit the supplementary return before 1 April of the year following the year to which the correction relates, this will save you tax interest and, in many cases, prevent a penalty. The supplementary return for underpaid VAT for 2016 must therefore be received by the Tax and Customs Administration before 1 April 2017.
You pay tax interest on additional VAT from 1 January of the year following the year to which the VAT relates. The tax interest is calculated on a simple basis at a rate of (currently) 4%.
However, if the additional tax assessment is based on a supplementary tax return that has been submitted before 1 April The Tax and Customs Administration does not charge tax interest for the year following the year to which the VAT relates.
If your supplementary return constitutes a voluntary correction to your VAT returns, the Tax and Customs Administration will not impose any offence fine . Your correction is deemed to be voluntary if you submit it before you have any reason to suspect that the Tax and Customs Administration may be aware of the error. You must, of course, explicitly correct the return(s) you have already submitted. Simply stating the VAT liability on the company’s balance sheet, for example, is insufficient. If you submit your supplementary VAT return before 1 April of the year following the year to which the VAT relates, the Tax and Customs Administration will regard this as a voluntary correction.
No late filing penalty will be imposed if your voluntary correction (in the form of a supplementary return) relates to an amount payable that:
- is less than €20,000 and;
- less than 10% of the VAT paid or refunded during the period covered by the supplementary return.
An additional condition for waiving the late filing penalty is that the supplementary return must result in the correct payment of the VAT due.
If the overpayment or underpayment of VAT is less than €1,000 and you include the correction in your next VAT return, you will, of course, not be charged any tax interest and no penalty will be imposed.