Offsetting payroll taxes with VAT

If you have to pay payroll taxes, but also expect a VAT refund on your next tax return, it is possible under some conditions to offset these two against each other. This can provide a cash flow advantage, as payroll taxes have to be paid on declaration, while the VAT refund always takes several weeks to be refunded.

You can only offset payroll taxes with a VAT refund if the following conditions are met:

• You have filed the payroll tax declaration that you want to settle with the VAT refund in time, as well as the VAT declaration itself.
• The tax return period for your payroll tax ends in the same month as the tax return period for which you will receive the VAT refund. For example, payroll tax returns for the June 2020 return period can be offset against the VAT return for the second quarter of 2020.
• You request a deduction at the latest on the last declaration date of the payroll tax declaration.
• You have no other outstanding tax debts.

When you file the request for deduction, a deferment of payment is also requested for the payroll taxes until the time of settlement. As soon as the VAT refund decision has been adopted by the Tax and Customs Administration, the two amounts will be settled. Please note that the deferral of payroll tax payments applies to the amount of VAT to be refunded. If the payroll taxes are higher than the VAT refund, the difference must be paid on time. If the VAT refund is higher than the payroll taxes to be paid, the difference will be disbursed to you.

We are, of course, happy to help you apply for this settlement in order to provide you with a cashflow benefit. If you have any questions about this, please let us know. We are also happy to think along with you to see if there are other options for you to improve your current cash flow position.

Adjustment of the return period

Are you an entrepreneur looking for opportunities to improve your cash flow? If you currently submit your VAT return every quarter and your VAT return usually results in a refund, it may be beneficial to submit your VAT return on a monthly basis instead. This means you will get earlier access to the VAT refund than when you submit your return every quarter.

Keep in mind that this leads to an extra administrative burden. Instead of submitting 4 quarterly returns, you would need to deliver 12 monthly returns per year. If benefits to cash flow outweigh the administrative costs, we advise you to change the tax return period. For this, you will need to submit a written request to the Tax and Customs Administration. We are happy to assist you with this and will think along with you to see if there are other options for you to improve your current cash flow position.

Determining your invoicing date

Are you an entrepreneur and looking for opportunities to improve your cash flow position during the coronacrisis? By smartly choosing your invoicing date, you can in some cases simply postpone the VAT to be paid by several months.

To do so, you must send your invoice to your client no later than the fifteenth day after the month in which you delivered your goods or services. For example, if you deliver on March 31, and draw up an invoice the same day, the VAT due must be declared in the VAT return of the first quarter. The VAT due must therefore be paid to the Tax and Customs Administration no later than April 30. However, if you wait until April 1 to prepare and issue your invoice, this invoice need only be declared in the VAT return of the second quarter. In this case, the VAT must only be paid to the Tax and Customs Administration before July 31.

This example illustrates that by smartly choosing the time of invoicing, you can delay your VAT payment to the Tax and Customs Administration with three months. As long as you invoice no later than the fifteenth day after the month of delivery, you can use the invoice date to your advantage. This is especially relevant in these troubled times, when your cash flow may be under more pressure. If you have any questions about this, do not hesitate to contact us. We will be happy to think along with you to see if there are other options for you to improve your current cash flow position.

Want to know more?

For more information, please contact your Mazars contact person. If desired, they can support you in submitting applications or put you in touch with one of our specialists. We are happy to assist you.