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Passing on Expenses

How do I add expenses I made to invoices and how does this work with VAT?

Sometimes you incur costs for a client or you advance expenses such as your travel expenses. In general, you can add these costs invoice, depending on what you agreed upon. Make sure you properly record your agreements. Since many contractors and clients make mistakes here, we'll explain below how to properly state this income on your invoice and also register it as an expense.

Income: expenses on invoice

If you pass on expenses to your client, you state these costs on your invoice and, from an accounting point of view, its part of the 'turnover'.

As soon as you pass on costs incurred, you calculate the same VAT percentage as you would do for your services. To be able to do that, you first need know the cost of the product or service excluding VAT. You thus deduct the VAT percentage paid and increase it by the percentage that you use for your service. The tax rate on the main service on that invoice is leading. In most cases, that is 21% of the costs incurred that you want to pass on. Do you normally calculate 9% or 0%? Then you also charge that VAT percentage on the charged costs.

Example 1

Suppose you have to invoice travel costs and have not agreed a fixed expense allowance for this. Then you deduct the VAT percentage of train journeys (9%) from the amount paid.

You put that amount excluding VAT on your invoice and then also calculate the VAT percentage (0%, 9% or 21%, depending on the service provided) that you charge yourself on the travel costs.

 

Return trainticket Utrecht - Amsterdam

€ 16,00

Ticket without VAT (€ 16,00 : 1,09)

€ 14,68

On your invoice  

Assignment

€ 1.000,-

Travel costs Utrecht - Amsterdam

€ 14,68

Subtotal

€ 1014,68

21% vat (1014,68 x 0,21)

€ 213,08

Total

€ 1227,76

Expenses: include (expenses)

After the costs have been passed on, you shouldn't forget to include the costs incurred in your administration. In contrast to an employment contract, the passed on costs are seen as sales. Therefor you also need to register this as an expense. Add the original receipt or invoice with the original VAT percentage to your expenses.

Example 2

Let's day you're carpenter. Depending on which service you provide the costs will be taxed with vat accordingly.

The following services for home maintenance are taxed with 9% VAT

  • Painting + Providing materials
  • Drywalling
  • Isolating
    • Only in this case are materials 21%! It's an exception to the rule.
  • Wallpapering

The following services that you might provide are taxed with 21% VAT. If you provide materials for these services, they are taxed with 21% VAT as well.

  • Repairing parts with new replacements of the same material, such as installing wooden inserts in frames and replacing wooden thresholds
  • Replacing windows, doors and frames
  • Sealant related work
  • Just repairing joints in brickwork
  • Applying glass 
  • Making basements free of moisture
  • Applying wrap film to objects, such as kitchen doors

by Mari Last update: 14 Jul, 2021