Around 90,000 sole proprietors give up every year. In the first quarter of 2022, there were already over 38,000 (!). If you decide to give up your business, there will be consequences. Among other things, for your VAT matters, such as the termination of your VAT number. In this blog, we tell you everything you need to consider.
Report it to the Chamber of Commerce
If you close your business, you must report this to the Chamber of Commerce. Retrieved from this page of the Chamber of Commerce, you can dissolve your company. You look for your company in the Trade Register, select „Dissolve company“ and then fill in the form to dissolve your VAT number. You can find your company via your VAT number. Attention! If you close your business, a number of things can be affected. Think of financing, (business) bank accounts, pension funds, insurance and municipal permits. It is therefore important that you read about the consequences of deregistration on their websites before deregistering with the Chamber of Commerce.
After you have deregistered with the Chamber of Commerce, the Chamber of Commerce will forward this to the tax office for you. You will then receive a letter from the tax office informing you of the consequences for your income tax and sales tax.
Organize your current VAT matters
The letter you receive from the tax office will tell you whether you have to submit a final VAT return. Only when you have submitted your final tax return will the tax office remove you from the list of VAT-registered entrepreneurs and cancel your VAT identification number. It may be that you have not yet been deregistered, but have received a request from the tax authorities to submit a VAT return. Submit the declaration! Your deregistration may take some time.
You will receive another letter from the tax office confirming your deregistration with the Chamber of Commerce. This letter also confirms that they will cancel your VAT number. The letter also contains a request to settle your tax affairs. Finally, you will have to submit an income tax return one last time.
Consider other financial implications
In addition to VAT, it is important to keep an eye on other financial implications. For example, you should cancel any current insurance policies for your company and terminate any current contracts. Also think about your organization’s licenses, phone numbers, domain names and subscriptions. Before you close your business account: download all bank statements or the annual report, stop any current direct debits and recurring transfers and cancel any linked credit cards.
The administrative aftermath
You have deregistered with the Chamber of Commerce, submitted your last VAT return and had your VAT number deleted. What now? As for business documents: you should keep them. It is important that you keep your records properly, otherwise the tax office itself will check how much turnover and profit your company has made and levy taxes on it. So if you do not agree with this calculation, you will need your documents as evidence: this is called reversal of the burden of proof. It is also important that you keep your documents so that you can take advantage of certain regulations. For example, the small business regulation (VAT) or the investment allowance (income tax).
The retention period is seven years, sometimes even 10 years. This depends on the type of data your records contain and is required by law. For example, records containing data on immovable property (e.g. business premises) must be kept for 10 years. Also, if you sell products/goods to customers/private individuals in the EU who are not required to file a VAT return and if you have opted for the OSS (One Stop Shop) system, you must keep the data for ten years.
Keep your documents:
Here’s what you should definitely keep:
- General ledger
- Accounts receivable and accounts payable management
- Warehouse management
- Management of purchasing and sales
- Payroll
- important data for the taxation of third parties
Don’t feel like clearing away all the paperwork? It is also permitted to scan them and store them digitally. But: If you have digital files, it is not enough to just put a printed copy in the files. When an audit is due, the digital files must be usable and the programs used to use the files must work.
If you still want to do things differently, you can make an agreement with the tax authorities. You can discuss whether you can keep basic data for a shorter period of time, what form you keep the records in and how detailed you keep the data. You have to be careful here because the agreements you make only apply to the tax office. For other government agencies, the seven-year retention period still applies. Even if you stop your activity, you must comply with the retention period.
This is what you should do if you employ staff
Of course, if you employ staff, you must ensure that your employees have enough time to find new work. First of all, you must apply for a dismissal permit . In addition, you can draw up a social plan . This is not required by law, but you can make certain agreements in it. Think about transitional allowances for your employees and whether they should be supported in finding a new job. You should also inform the tax authorities about the dismissal. You can find out exactly what you need to submit in step 17 of this guide .
And what next?
Ending your business doesn’t always have to be a negative thing. It can open up space for a new future – for example, you could retrain (on a program), return to employment, or start a new business.
Still not tired of entrepreneurship? Then you are free to start a new organization. You could redesign your company: it suits you better or the times. Or you could go into paid employment and become a part-time entrepreneur. Taking over an existing company is also an option. This has several advantages: you also take the customers, the name recognition and a physical workplace with you. There are websites where you can find companies you can take over.
You don’t want to give up your business but need help with VAT?
Then you have come to the right place. Arrange a non-binding consultation so that we can discuss your situation together. Then we will see which tax model best suits you and your company.
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