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Taxes in proposals

Whether or not to mention the VAT in proposals sometimes leads to questions. With one source of information, it is claimed that the mention is mandatory, while another indicates that it is only a requirement for invoices. What is VAT actually, how much is the VAT and when is it mandatory to include it in a proposal?

What is VAT?

The abbreviation VAT stands 'value-added tax'. VAT is a form of tax. Formally, this is called the consumption tax, but most people know it as sales tax. When products or services are purchased or purchased, a certain price is paid for this. This includes tax (VAT). The selling party then transfers these to the government again. VAT is an important source of income for the government. The money earned from this tax is used to pay for other things. Think of projects or subsidy schemes. The information in this blog is mainly written from Dutch perspective, please check your countries guidelines.

VAT rates

There are two VAT rates: 9 percent and 21 percent. Depending on what is purchased or purchased, there is either 9 or 21%. The most common is 21%. However, there are products and services where the lower VAT rate applies and there are even those for which no VAT rate has to be charged at all. For example, the low VAT rate (9%) includes books, medicines or a haircut at the hairdresser. For international passenger transport, there is no need to charge VAT and this also applies when you deliver goods to a company in an EU country. Want to know more about this Then go to the tax authorities website for a complete overview of the high and low VAT rates.

Include VAT in proposals

For the (mandatory) mention of VAT in proposals, a distinction is made between individuals (consumers) and entrepreneurs (companies). Below it is clear when it is mandatory, when not and what is recommended.

Include VAT in proposals to private individuals/consumers

For proposals to private customers, prices or rates of products or services should always be displayed including VAT. Companies that provide products or services are therefore not allowed to issue proposals where the price is only given exclusive of VAT. In order to avoid confusion among private individuals, this is therefore regulated in the Turnover Tax Act.

In fact, Article 38 Wet OB states: “The entrepreneur is prohibited from offering goods and services to others than entrepreneurs and bodies governed by public law at prices with such indications that the turnover tax would not be included in the prices.”

In addition, by other law, it is also prohibited to issue a price excluding VAT to individuals. In article 6:193 e Dutch Civil Code of the Unfair Commercial Practices Act, it is clearly stated that a price is inclusive of VAT, as 'essential. This means that not only mentioning in proposals is mandatory, but that it should also not be missing in (advertising) leaflets and the like that that are addressed to consumers or individuals.

Prices and rates in proposals to private individuals/consumers should therefore always be stated including VAT. Violating this can result in a substantial fine. Of course, one may choose to show prices and rates both inclusive and exclusive. One last point of attention: when the offering has inadvertently forgotten the VAT, the offering party will pay for VAT. This cannot be recovered from the private customer.

Include VAT in proposals to entrepreneurs/companies

When one is a taxable entrepreneur, it is really just about the net price or the rate excluding VAT. The VAT that is charged is paid to the tax authorities. The buyer or customer does the same thing; after all, the VAT paid can be recovered from the tax authorities. This means that there is no obligation to report with proposals to entrepreneurs. But here too applies: clarity or transparency above all else. It is therefore wise to state clearly in the total amount whether it is in- or exclusive of VAT. When you use online proposal software, amounts are automatically given in net (i.e. excluding VAT). At the bottom of the line is the subtotal, followed by the VAT amount and the total amount.

Lastly

In order to properly inform customers and prospects, regardless of whether they are private or entrepreneurs, it is recommended to be as clear and complete as possible. Also in proposals. The most successful offers are proposals that are concrete and transparent. This creates trust and trust is the basis for lasting relationships.

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