As a self-employed person, you sometimes incur expenses on behalf of a customer. These might include hotel stays, taxi fares or other out-of-pocket expenses. But how should you pass these costs on to a customer? And what does this mean for your bookkeeping and VAT?<\/p>\n\n\n\n
In this article, we provide an explanation step by step.<\/p>\n\n\n\n
<\/a><\/p>\n\n\n\n <\/a><\/p>\n\n\n\n If you want to pass on costs to your customer, you must always create a sales invoice<\/strong>. You can select how to do this:<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n <\/a><\/p>\n\n\n\n Both options are permitted; the accounting treatment remains the same.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n Example<\/strong><\/p>\n\n\n\n You pay \u20ac200 for a hotel stay during an assignment abroad.<\/p>\n\n\n\n You list the \u20ac200 on your sales invoice and that amount counts as turnover<\/strong> in your accounts.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n <\/a><\/p>\n\n\n\n You issue a sales invoice to your customer to pass on costs. The passed-on costs are turnover for your accounts. There is no special rule for passed-on costs. You invoice them and they are included in your turnover.<\/p>\n\n\n\n You then also record the expenses in your accounts. The costs you pass on to your customer are thus also recorded as a cost in your accounts. This means no profit remains in your accounts.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n Example<\/strong><\/p>\n\n\n\n <\/a><\/p>\n\n\n\n You pass on \u20ac200 in hotel costs to your customer; this is \u20ac200 in revenue. You record the hotel invoice as a cost; this is a \u20ac200 expense. Net effect: no extra profit in your accounts<\/strong>.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n If you have lost the original document (e.g. a taxi receipt), you cannot<\/strong> record the cost.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n Your bank statements show you how much it cost, so you know which costs to pass on to your customer. You add this item to your sales invoice; the passed-on costs are therefore invoiced and included in your revenue.<\/p>\n\n\n\n You no longer have proof of the taxi cost because you\u2019ve lost the receipt. You cannot therefore enter this cost in your accounts.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n <\/a><\/p>\n\n\n\n Example<\/strong><\/p>\n\n\n\n You pass on a \u20ac100 taxi fare to your customer, but you don\u2019t have a receipt.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n <\/a><\/p>\n\n\n\n The VAT on your passed-on costs follows the same VAT rate as the main transaction, your services. The ancillary transaction follows the main transaction.<\/p>\n\n\n\n The VAT on passed-on costs always<\/strong> follows the VAT rate of your service, not that of the original cost.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n Example<\/strong><\/p>\n\n\n\n <\/a><\/p>\n\n\n\n <\/a><\/p>\n\n\n\n This may seem strange, but the secondary item (hotel cost) follows the VAT rate of the primary item (services). There is no advantage or disadvantage to this. In this case, you invoice at 21% VAT, you receive that extra VAT and pass it on to the tax authorities. Your customer can reclaim that charged VAT.<\/p>\n\n\n\n If you pass on costs only<\/strong> without any other services, you use the VAT rate of the original cost. This rarely occurs in practice.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n <\/a><\/p>\n\n\n\n There is one exception where you do not create a sales invoice. If it concerns a purely financial transfer, you do not need to pass on any costs to a customer.<\/p>\n\n\n\n You advance a cost financially, but the document goes directly into the customer\u2019s accounts. You therefore do not record the cost in your own accounts; you have simply paid.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n You do not record the cost in your own accounts and simply receive the advanced amount back. This is a purely financial refund, not a passed-on cost.<\/p>\n\n\n\n You therefore do not need to create a sales invoice here to pass on the cost to your customer. Because nothing has happened in your accounts.<\/p>\n\n\n\nVia a sales invoice<\/h2>\n\n\n\n
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What is the impact on the accounts?<\/h2>\n\n\n\n
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You no longer have the document to enter into your accounts?<\/h2>\n\n\n\n
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Passing on costs to a customer: what about VAT?<\/h2>\n\n\n\n
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Exception to the VAT rate<\/h3>\n\n\n\n
Exception to passing on costs via a sales invoice: purely financial transfer<\/h2>\n\n\n\n