VAT due for management services rendered but not yet payable

A BV and B BV entered into a management agreement with a duration of 3 months. Under this agreement, B BV was obliged to pay an amount of € 6,500 per month, excluding VAT, for the management activities. Parties continued the collaboration after the end date of the agreement. There was no dispute between them, that B BV would owe an amount of € 6,500 per month, excluding VAT, for this.

B BV ran into difficult financial circumstances. Parties  agreed not to invoice all amounts due under the aforementioned agreement. If the financial conditions would improve, invoicing would still take place.

B BV has included in its financial statements a provision for the management services not yet invoiced. A BV has reported a similar receivable in its annual accounts.

Additional assessments were imposed on A BV. The question to the court is whether A BV had an obligation to issue invoices for the amounts, and therefore whether A BV owed the related VAT under Article 13 of the Dutch VAT Act.

According to the lower court, A BV and B BV continued to act in accordance with the agreements made and the management activities carried out by A BV took place for a fee. A BV should have issued invoices to B BV. Insofar as it has not done so, under Article 13 of the VAT Act, it is liable to pay VAT at the time when A BV should have issued the invoices. The Tax Authorities have therefore correctly assessed VAT.

Source: rechtspraak.nl

Author: Joyce Westerveld, VAT Advisor at RED

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