What is a VAT return?

A company sells products and charges VAT to its customers. It also buys goods and pays VAT to its suppliers. Once per period it sets the two side by side, what it charged minus what it paid, and the balance goes to the tax authority or comes back.

The return is split into boxes, for example for sales in the Netherlands, for sales to other countries and for VAT you may reclaim. Most of the work lies in giving every posting the right VAT code, so the amounts end up in the right box.

What goes wrong? A supplier invoice is posted without a code or with the wrong one, an invoice lands in the wrong period, or a foreign customer is treated incorrectly. Then the balance is off and you have to correct it afterwards. For sales abroad, reverse-charge VAT or an EC Sales List also comes into play.

Pay attention to a tidy period end. If the books are up to date, the VAT codes have been checked and the period is closed before you take the figures, there is little to correct. That belongs to the month-end close. Keep a copy of what you filed too, so you can later trace what the figures were based on.

How a particular transaction belongs in the return is something your bookkeeper or accountant confirms. It is better to agree that up front than after the event. For a business with many small sales, one unclear VAT code can touch hundreds of postings. So before you prepare the return, look at an overview per VAT code and watch for amounts that are unusually large or small.