A BV carried out operations in 2015 and 2016. For this, the BV recorded on its balance sheets “turnover yet to be invoiced” on. The BV did not invoice these amounts until 2019. The Court in The Hague concludes that VAT should not have been paid in 2019, but in 2015 and 2016.
For 2015 and 2016, the Inland Revenue levies VAT (almost €335,000) on the turnover not invoiced on time. It also imposes a default penalty of 10% and charges €37,000 in tax interest.
When to invoice?
VAT must, within the invoice system, The tax must be paid in the tax period (usually the quarter) in which the invoice is issued. The invoice must be issued no later than the 15th day of the month following the month in which the service was performed (due to continuous services, an invoice must be issued at least once a year).
If the invoice is not issued or not issued on time, VAT is still due.
Entrepreneurs who have the cash accounting must or may apply, pay the VAT in the return period in which the fee is received.
Discussion
The BV's argument, for not yet issuing the invoices in 2015 and 2016, is that there was still disagreement between the buyers about the division of costs. The court considered that this disagreement was separate from the delivery and acceptance of the work. Because the work has been delivered, the performance has been carried out and VAT is due; even if the invoice has not yet been issued.
The BV invokes a different ruling which the District Court of The Hague did in January 2021. But in that, there was disagreement with the client about the quality of the work carried out. That disagreement affected when the work was completed and therefore when VAT was due.
It also Budimex ruling of the ECJ does not help the BV. In this judgment, the Court ruled that VAT is due at the time of formal completion and acceptance of a work, if this formality:
- of delivery and acceptance has been stipulated by the parties and this reflects the economic and commercial reality in the industry, and;
- corresponds to the material completion of performance and definitively establishes the amount of consideration due.
However, the mutual disagreement between the buyers does not affect the delivery and acceptance of the work.