by Eunice | Nov 5, 2022 | European VAT
1. It Is Higher than UK’s
The Belgium VAT has the same principle as UK’s—it is a consumption tax charged on goods and services to the final consumer. Businesses do not pay VAT; instead, they remit this indirect tax and report it to the proper authorities.
Although Belgium follows the EU directives on VAT, it remains free to set its standard rate, often above 15%. To date, Belgian VAT stands at 21%, slightly higher than UK’s 20% on most taxable goods and services.
With Brexit in 2020, the movement of goods from the UK to Belgium is considered importation rather than intra-community acquisitions. Hence, imports are subject to Belgian VAT, with the tax due paid to customs.
2. The VAT System Is Tiered
In Belgium, the VAT system consists of different tiers as set by royal decree, with reduced rates applied to specific classifications of products and services. For example, certain foodstuffs are charged with reduced rates of 6% and 12%.
Moreover, a limited number of goods are zero-rated for VAT, while a few are VAT-exempt. There’s a difference between the two—with the former, you still have to charge 0% VAT and report the transaction on your return. With the latter, you don’t need to apply VAT.
If you want to know the correct VAT rate for your goods or services in determining your tax obligation, visit the Federal Public Service Finance of Belgium (FPS Finance) website.
Alternatively, you can work with an accountant well-versed in the Belgian VAT Code, such as from Sterlinx Global.
3. There’s a VAT Threshold
Generally, there is no threshold for non-resident companies providing taxable goods and services in Belgium. However, the rule differs for those involved in e-commerce.
The VAT threshold or the limit where a business is required to register for VAT is an annual turnover of €10,000 for intra-community sales. If you expect yearly sales to be below this, you don’t have to be VAT-registered.
However, it’s better to go through the registration at the onset to avoid complications should your future turnover reach the cap.
4. Registering for Belgium VAT Doesn’t Require a Local Company
If you’re a UK-based distance seller, you don’t have to set up a local company in Belgium to conduct business.
However, you are required to register your business for VAT in the country despite trading online. Doing so means complying with Belgium’s taxation laws and avoiding significant penalties.
Belgium VAT Registration
To be VAT-registered, you must obtain a 10-digit Belgian VAT Number with a ‘BE’ prefix. Apply for one by completing form 604a with the following information:
- Memorandum and Articles of Incorporation
- An excerpt from your business’s national trade register
- Start of trading date
- VAT certificate or certificate showing taxable status
- Proof of activity in Belgium (customer order forms, contract, etc.)
The registration process may take three to four weeks after receipt of the required documents. In addition to completing the VAT registration, non-EU companies selling in Belgium should appoint a fiscal representative.
Although UK-based businesses are exempt from this requirement appointing a representative under the EU-UK Trade and Cooperation Agreement, it’s best to work with one from Sterlinx Global or a tax advisor.
They will be responsible for fulfilling obligations, such as submitting and filing VAT, on behalf of their clients.
Filing Frequency
As a VAT-registered business in Belgium, you must submit the corresponding VAT return every month or quarter.
Generally, you must file monthly returns on the 20th of the following month for the covered period. For example, the return for VAT-charged transactions in July should be submitted no later than 20 August.
Occasionally, Belgium announces an extension for submitting VAT returns, especially during the summer holidays. During these instances, you can delay the filing but not the payment of VAT due every 20th of the month after the period covered.
Keep in mind that quarterly filings are only possible under certain conditions. Consult with a tax adviser or accountant if your business can qualify for this option.
Periodic VAT returns should be filed via the electronic platform INTERVAT.
VAT Filing Penalties
The penalties for failing to comply with the deadlines are as follows:
- Late filing: €250 per return and per month overdue
- Late payment: 15% of the VAT due plus 0.8% interest per month of delay
Because of the significant fines for non-compliance, it’s cost-effective to use the services of an agent or tax representative.
5. You Can Settle VAT Obligations Online
VAT-registered distance and e-commerce sellers can declare and pay their Belgium VAT via the Import One-Stop Shop (IOSS). It was an electronic portal introduced in July 2021, along with changes in VAT rules for e-commerce.
The IOSS system for VAT covers transactions involving goods imported into the EU, especially ones made through an online platform or marketplace. When you register through the portal, you can use it as a channel for paying the declared VAT.
6. Belgian VAT Compliance Is Complicated
VAT compliance in your home country is already tricky. However, it gets increasingly challenging when it involves another country’s taxation regulations. In Belgium, below are a few of your obligations.
Accounting Obligations
As a business subject to VAT, you should:
- Maintain a record of accounts reflecting the amount declared in the periodic VAT return and substantiated by a document
- Keep separate books for incoming invoices and outgoing invoices, a revenue ledger for transactions without invoice issued, and a centralised ledger if with several places of business
Invoicing Obligations
Your obligations include:
- Issue invoices disclosing important details defined in the Belgian VAT Code
- Invoice customers for goods based on the applicable VAT rates
- Keep invoices and copies thereof, accounts, and other records for a minimum of 7 years
Since it can be hard to keep up with compliance, it’s better to have a local accountant or fiscal representative who can manage these obligations for you.
by Eunice | Nov 3, 2022 | European VAT
TITLE: Free Accounting Software with VAT Tax for Small Businesses: Top 10 Free Tools for Accounting
SMEs or start-ups have to keep track of their expenses to grow or expand. Keeping track of their expenses will equally enable them to pay the right amount of taxes and comply with VAT payments and rules from Her Majesty’s Customs and Revenues (HMRC).
In addition to this, you and your business may face piles of invoices or adjustments from the budget or tax reforms. If you purchase the right accounting software, you will be able to automate key functions ranging from tax management, financial investment, and invoicing amongst others.
Before you are set about choosing your accounting software, you should weigh a set of factors such as basic accounting requirements that include payroll and expense management functions.
Additionally, you should equally gauge the effectiveness of software by identifying potential use cases in the cloud to facilitate collaboration and co-working from various parts of the world.
In this article, we take a look at the ten best accounting software and key VAT features that are relevant to your business.
Top 10 Free Accounting Software You Should Try
1. Xero
Xero is primarily designed for SMEs or entrepreneurs that intend to manage key accounting functions such as bank reconciliation, invoicing as well as payables and receivables.
It has a good market reputation and is a good accounting software that can support tax management issues due to its functionalities that allow it to deduct sales tax on any transactions.
Sterlinx Global packages equally come with fully managed Xero services, where Sterlinx records and reconciles all sales and purchases.
2. QuickBooks Online
As a cloud-based system, Quickbooks is very popular and can be useful in helping to synchronise all your bank account transactions and help teams collaborate in the provision of detailed reports.
As an entrepreneur that may have some e-commerce deals, it equally enables you to deduct things such as sales tax from all your invoices whilst enabling you to calculate the appropriate tax based on where your start-up may be located.
3. Sage
In addition to being useful at helping with core functionalities and financial functions such as accounts receivable, it can equally help companies with budgeting.
One of the major strengths of Sage is the fact that it can be linked to VAT reporting and can equally help companies align budgets and accounting reports, and subscription billing.
4. Kashoo
Kashoo is a comprehensive software that equally operates on the cloud. It is effective at handling invoices, vendors, and e-commerce businesses.
It can equally synchronise entries from the bank with their ledger. Kashoo is effective at managing balance sheet data and providing a range of services including invoicing, and expense management, which is ideal for most start-ups and SMEs.
5. NetSuite
NetSuite is another cloud-based service with a good enterprise resource planning (ERP) system, which possesses a range of tools from budgeting to financial reporting.
It is effective at managing issues related to compliance and can be very useful for tax management. It is a great tool for businesses and start-ups operating in any sector.
6. FreshBooks
If you’re looking for a good cloud-based accounting system, FreshBooks may be appropriate for you as it is double-entry accounting software that can equally enable you to manage other tax affairs.
This is excellent for small businesses that care about time tracking, expense management, and invoice management. You can easily integrate different forms of payment, such as PayPal.
7. KashFlow
Kashflow is unique from other software in addition to being a cloud-based service. It can automatically update your VAT payments from financial documents in your system.
If you are looking for core functionalities such as payroll management, this is the software for you.
8. Wave
Wave has an excellent cloud-based service and it is adapted to be used on mobile devices with useful functionalities such as recurring bills and receipts.
As one of the newer software, it is perfect for entrepreneurs on the go as it can be used from multiple digital platforms. It is ideal to be used for receipt management and will ensure that company’s bills and VAT payments can be traced back easily.
9. Free Agent
Free-agent is cloud-based and enables you to stay up-to-date on your expenses and essential accounting tasks.
It is great for monitoring expenses, invoices, cash flow, and taxes. It can be used to prevent you from missing key deadlines and automate your VAT filing system. This is indispensable to start-ups as it enables you to file your VAT on time.
10. Zoho Books
This accounting software with useful and prominent cloud services facilitates end-to-end tasks such as invoicing and reporting.
It is a useful tool in invoice management and can be used for accounting dashboards as well as expense management.
Frequently Asked Questions
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What is the difference between Xero and Quick books?
Both Xero and Quickbooks Online are great software. However, they are quite different and have different strengths. Xero is good for inventory management, which is needed for most E-commerce businesses. However, QuickBooks Online has good reporting capabilities.
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Which is the best accounting software for VAT?
Undoubtedly, Xero is one of the best accounting software out there. It enables you to link your VAT payments automatically and has a commendable cloud service. Xero has got rave reviews from its users across several industries.
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Which service is the best for VAT automation?
If you want an automated service for VAT payments with cloud functionalities, you should use Kashflow. Based on reviews, it is one of the best services for automating your VAT payments to HMRC or the national tax authority.
Conclusion
There is a range of accounting software that businesses and start-ups can use to manage their taxes and invoices.
This article provides a useful summary of ten accounting software that businesses and start-ups can use to better manage their finances and VAT payments.
The majority of the accounting software presented in this article is cloud-based and has great functionalities across a range of areas.
If you need professional help, check out Sterlinx Global.
by Eunice | Nov 2, 2022 | UK Accounting
Anthony’s Journey to Amazon Success
Anthony has owned a pet supplies store for almost three years. Even though he was new to the business, he took advantage of any opportunity. Soon, Anthony discovered the potential of selling online.
He created an online store to maximise the mobility of products sold on Amazon. Soon enough, he saw an increase in orders and found this new venture a rousing success. However, an online business soon became challenging for him and his only accountant.
The Accounting Challenge
Anthony left all the financial, accounting, and bookkeeping to his lone accountant. He was not an expert when it came to tax accounting. What became a problem was his Amazon accounting needs. His accountant was already busy keeping track of the finances of his physical store.
With a big business, managing tax accounting and finances for his physical store is already a lot to take care of. His Amazon online store would need Amazon accounting to ensure its finances, taxes, and payments are on track.
Since he himself was not an expert in Amazon accounting, Anthony expected his only accountant to take care of the finances of his online and offline store. His accountant kept up with the demand when his online business started. However, the growth of his online business on Amazon soon became demanding.
Mounting Problems
His accountant faced difficulties keeping track of his online and physical stores. The situation reached a point where Anthony missed some of his tax payment deadlines and was charged with penalties. Aside from that, there were noticeable lapses in his accounting and bookkeeping.
Anthony knew he could not help so much with the tax accounting. He also knew that his accountant needed all the help he could get with Amazon accounting.
With the number of problems that took a toll on his business, he began looking for experienced accounting for Amazon sellers that could lessen his accountant’s burden.
His lacking knowledge of tax accounting would drag his business further down under penalties that were already piling up. He needed help, fast.
Finding the Right Solution
Luckily for him, he found out about the services offered by Sterlinx while scouring the internet. He had just wanted help for himself and his accountant with accounting for Amazon sellers, but he got more than he expected.
Sterlinx treated each of his business concerns as problems unique to his situation to develop personalised solutions.
We provided Anthony with an Amazon FBA Accountant for his Amazon store. Our services extended to more than just accounting; we relieved his burden by taking care of calculating his eCommerce VAT, VAT calculations, and filing.
Sterlinx provided him with expert and professional Amazon FBA accountants that took care to ensure he was up to date with his tax deadlines.
The Results
We dedicated ourselves to giving Anthony full assistance after knowing his business goals. We dedicated ourselves to aligning the services we provided to his current and future business goals.
Anthony worried less about the penalties he might face by missing his tax deadlines. His business continued to boom both online and offline.
We at Sterlinx give you the breathing room to work at the frontline of your business while we take care of everything accounting.
We Can Make Your Online Business Beginnings Work for the Best of You
We do not see problems. We see opportunities. Every opportunity for improvement that you miss can be critical to your business goals. Let us, Sterlinx Global and our team of expert accountants work with you. Contact us now.
by Eunice | Oct 31, 2022 | UK Accounting
You can deduct some expenses from your VAT returns
While HMRC taxes some revenues and profits as a sole trader, there are some expenses that you can deduct from your final VAT bills, such as transport, software, and Internet-related expenses. Sole traders can claim back such expenses as they are considered necessary and value-added activities by HMRC.
As such, most of the costs directly related to the work you do (such as travel, transportation, and bills) can be legally deducted when calculating your gross income and how much tax you are required to pay. Such expenses are generally called “tax deductible”.
1. Office Supplies
If you are a freelancer trading as a sole trader, you are allowed to claim back VAT on office supplies such as stationery, printing costs, ink, postage, phone, and other items that are required to complete the job effectively.
2. Equipment for the office
You are allowed to claim expenses for equipment such as computers, software, and hardware that have been used for over two years, provided you use cash-based accounting. However, if you use accrual-based accounting, you will need to claim capital allowance instead.
3. Business premises
Expenses you can claim on your business premises include items such as rent, business rates, utilities, buildings insurance, and maintenance repair as well as security costs. Remember that if you purchase your premise, you are not allowed to reclaim any costs as part of the allowable expenses.
4. Transport
Any transport that was undertaken during the job can be reclaimed, but this does not include transport to and from work. If a journey was made for business purposes, then you can reclaim these from your VAT returns. For freelancers trading as sole traders, this is important as they may not always have a fixed location.
5. Legal and other professional costs
Any professional services such as accountants and lawyers should be deducted from your final tax bill. These are significant costs for sole traders and can be deducted according to HMRC.
6. Raw materials/stock
According to HMRC, you are allowed to claim raw materials on the stock that is used to make your products or service. The nature of stock may differ from one sole trader to another, but HMRC allows you to reclaim any stock-related expenses.
7. Marketing and advertising costs
A majority of your marketing or advertising costs can be accounted for as an allowable expense. This includes social media marketing, offline marketing, and other related materials that are used to promote your business.
8. Professional Insurance
In some jobs, you are required by law to possess professional insurance. For example, public liability insurance, travel insurance, or even indemnity insurance as a professional. HMRC allows you to claim these as an allowable expense.
9. Uniforms or clothing
As a freelancer, any special uniforms or clothes that are needed to complete or execute your job are tax-deductible. This is the case for construction workers, chefs who work as sole traders, and other professions that require specialist uniforms.
10. Trade subscriptions
If you are a part of membership bodies, you can deduct this from your final tax bill. This is especially the case if such subscriptions are indispensable to performing your job.
Frequently Asked Questions
What expenses can I claim if I have a home office?
If your home is equally your office, as is the case for many freelancers, you can claim expenses such as heating, council tax, and internet costs. However, the portion of utilities you claim will have to be proportional to the space your office occupies.
Is there a tax-free trading allowance from HMRC?
This is an amount for those who are self-employed but earn £1,000 a year or less. Such employees are not liable to pay any tax to HMRC. However, if you incur high costs or can say your income changes dramatically, it is not a bad idea to register with HMRC anyway.
What are the various tax bands in the UK?
As a sole trader, all the profits made by your business belong to you personally. Consequently, any profits you make as a sole trader will be taxed alongside business profits as the HMRC considers them the same. Taxes on profits as a sole trader will generally be added to your income and jointly assessed by HMRC. England and Wales have a personal allowance of up to £12,570, with a 20% basic rate for freelancers earning between £12,571–50,270 and 40% £50,271–150,000.
Conclusion
At Sterlinx Global, we believe sole traders who may be e-commerce traders or other types of traders should leverage all the allowances they can get from HMRC. Not only does this save costs, but it also creates an opportunity for you to run a successful business.
Taxes for freelancers do not need to be complicated, and we provide a guide on how to save on your tax bill. Freelancer tax is important and can save you significant costs and fines in the future if properly handled. Contact one of our experts who can help you navigate your taxes and stay up to date with changes in the regulation.
by Eunice | Oct 28, 2022 | Business
1. Understanding What Accounting Essentially Is
Commercial accounting sounds daunting, but it doesn’t have to be if you know its meaning. By definition, it is recording the financial transactions of a business. It also includes summarising accounts and analysing statements to determine a business’s financial health.
Proper commercial accounting gives you the necessary information to make short- and long-term strategic decisions. Moreover, it provides an accurate snapshot of your company’s performance and condition to investors, lenders, and government agencies.
2. Keeping Track of Your Income and Expenses
Your primary goal in beginning a business is to earn. The best way to know you’re on track is to record every income from products sold or services rendered. Keep copies of issued receipts and sales invoices, then tally these to get a running balance.
Do the same to your expenses or costs incurred in operating your business. When you pay a utility bill or settle outstanding balances from your supplier, file away the pertinent document and record the transaction in a logbook or software.
Since income is the basis of your taxes, you must maintain records for six years, according to the HMRC. Only once this period lapses is it safe to toss out those documents.
3. Knowing Your Assets, Liabilities, and Equity
Besides income and expenses, commercial accounting also entails monitoring your business’s assets, liabilities, and equity. Simply put, assets include cash for the company, equipment, inventory, and other resources essential to running a successful operation.
Liabilities, on the hand, pertain to what you owe—unpaid balances from suppliers, bank loans, and other forms of debt. Equity is your investment in the business and accumulated earnings from previous years.
One important equation to remember is Assets = Liabilities + Equity. It means your assets are funded by borrowings, investments, or both. Create a balance sheet to see whether you depend heavily on debt to keep your business going.
Borrowing is an acceptable business practice—only when done prudently. Moreover, lenders tend to be more averse to extending credit to heavily indebted companies, even those deemed profitable.
4. Monitoring Cash Flow
Another crucial commercial accounting know-how is looking at your cash flow. When doing business, keep in mind that money constantly moves in and out of your company. For instance, selling goods suggests cash is coming in, while purchasing supplies indicates an outflow of funds.
It’s easy to monitor how much money you have if you’re selling and buying on a cash basis—no credit transactions. However, such isn’t always the case, as you’ll sometimes need to purchase or make a sale on credit.
If you offer credit terms to your customers, mind how much of your sales are receivables. Whenever possible, keep this portion minimal to ensure you have enough funds to sustain operations. And if your suppliers allow credit or discounts, take advantage of these to optimise your cash flow.
A cashflow statement will keep track of your business’s operating, financing, and investing activities. It can be confusing to create one, but you can start by noting which of your revenues are already paid and how much of your inventory requires settling.
If you want to understand your cash flow further, consider hiring an accountant—such as one from Sterlinx Global—to do your books. They will help you determine how long your receivables and payables are and whether there’s a significant mismatch in terms.
5. Having a Different Bank Account for Your Business
When doing business, it’s vital to have a bank account that you can quickly monitor and easily access. It’s also important that this account is used solely for company operations.
By segregating business from personal transactions, you’ll have a better grasp of your finances, besides less complicated commercial accounting. You can see where funds come from and are used—you don’t have to be confused about which portion of the money is for your personal spending or business.
Besides offering protection, opening a separate bank account sometimes offers perks particular to business clients. If you need further convincing, it is easier to obtain loans to cover funding gaps.
6. Being Familiar with Tax Regulations
One of the most significant commercial accounting information a budding entrepreneur such as yourself should know is taxation.
Taxes are part and parcel of doing business—no one is exempt from paying them. Different regulations apply to specific industries, location, and products, so you must know what applies to your company.
For example, when you plan to sell goods on Amazon or other online marketplaces, you have to pay sales tax based on where your customer is from.
If you’re still unsure of the taxes specific to your business, consult a professional such as an accountant from Sterlinx Global.
7. Settling Taxes
Once you know the taxes you should be complying with, you should plan for these ahead. Since sales tax is collected from your buyers, make sure you set this aside for future remittance to the government. If your sales exceed the VAT threshold, you have to pay the bill to HMRC.
Income tax, on the other hand, cannot be passed down to your customers. However, there are ways to ensure you’re not overpaying. One is by thoroughly accounting your business expenses.
Remember that paying the right taxes involves filing the correct returns, which involves proper commercial accounting. A professional will be a big help to new business owners like you.
Frequently Asked Questions
Can I handle my own accounting?
Yes, you can, especially if you already know the basics. However, if you need external funding—through investors or lenders—they might require a copy of audited financial statements, often prepared by a qualified accountant.
But during the early stages of company formation, consider outsourcing commercial accounting.
