[sgift]

It seems you didn't actually read (or understand) the post: The problem is that - until now - they DIDN'T split it in two, so currently the tax authorities say "you are some kind of mix between company and non-profit, we do whatever we want with you" (obviously simplified, read the post!). But at least they gave them a suggestion for the FUTURE: Split up, you will have no more problems.

So, there is no intention to deceive, just a simple misunderstanding which leads to very grave problems (as usual when taxes are involved and you are small).

[mrkrabo]

That's exactly what I'm saying. They have busted them cold so they're going to be more careful about their fraud in the future by splitting the company in half.

[gcp]

Do you even understand what VAT is and how it works?

They are and were collecting VAT on their sales. This part is unavoidable regardless.

For the stuff they buy, they're not avoiding VAT. There's no point in avoiding VAT because it doesn't cost a business anything. YOU GET IT BACK FROM THE STATE. The whole point of VAT is that it is a zero-sum game for businesses. But due to their old structure, they're in a situation where they have to pay but can't get back. That's not how VAT is supposed to work.

[mrkrabo]

Of course I know what VAT is. I am a freelancer based in Europe. And I know if I'm paying SOMEONE for his services I also have to pay VAT, regardless of whether I'll get it back later or not. Why? Because I have to prove that VAT was spent in something related to my business (I can't have the VAT from my food returned, for example). It does not only apply to goods, it also applies to services.

[gcp]

What you say is (or used to be) false for deferred VAT transactions, but anyway.

If you understand the nuance, why are you saying they're dodging taxes? The VAT on the freelancer is related to their business, so it is intended to be recoverable.

[mrkrabo]

Do you think it is acceptable to not pay VAT just because you know you'll get the money back? It is not legal, at least. Who are you to judge that? The government must know, because they are the ones to judge.

[gcp]

That's what VAT deferred transactions are...I'm giving up on your dear sir.

[bonzini]

You are a freelancer, not a nonprofit, right?

[sgift]

That 'fraud' has been advised by the tax authorities themselves. That would probably be a world-first that the tax authorities that just 'busted' you recommend how to not be busted in the future.