28/05/2025
Even if you run your activity as a side business or have just started your sole proprietorship, you must submit a VAT return. You must also allocate your expenses across different categories. This classification is essential to correctly declare VAT and recover deductible VAT. But concretely, which expenses should be included in each category? Here are the rules to follow.
Goods are items you purchase with the intention of reselling them to your customers. These typically form your inventory. You buy products from suppliers and then resell them with a margin.
Raw materials and auxiliary materials also fall into this category. These are elements you transform to create a product for sale.
Examples:
• a baker who buys flour and eggs to produce pastries
• a carpenter who buys wood to make furniture
• a retailer who buys products to resell in a store
These purchases are therefore considered goods and must be included in this category in your VAT return.
These assets are depreciated over several years. This means their cost is spread over multiple accounting periods based on their estimated useful life.
However, the VAT on an investment can be recovered immediately at the time of purchase, provided the VAT is deductible.
| Attention! |
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| If you sell computers, the computers you purchase for resale are considered goods. They are therefore not classified as investments. |
This category includes all expenses that are neither goods nor investments, but that are necessary for your professional activity.
Other goods include, for example, office supplies such as paper, ink cartridges and small accessories. These are physical items that you do not resell and that generally do not have a long lifespan.
Other services include intangible expenses such as your phone subscription, insurance premiums, internet costs, rent or marketing services. Costs such as electricity, water and heating also fall into this category.
At PIA Go!, we understand that the different product categories in your VAT return can be confusing. That’s why our PIA accountants help you classify your expenses correctly. This way, your VAT return is accurate from the start—saving you time and stress.
Want to know how we help you classify your expenses correctly?
Schedule a free video consultation today.
How do you correctly classify your expenses in your VAT return as a self-employed person?
You must divide your expenses according to their nature: goods, investments, other goods or other services. This classification is mandatory and ensures that VAT is declared correctly and that deductible VAT can be recovered where applicable.
What is the difference between an investment and a current expense?
An investment is a purchase of at least €1,000 (excluding VAT) that you use for several years in your activity. Examples include a laptop, a machine or a vehicle. Current expenses refer to everyday costs necessary for your activity, such as office supplies, software or travel expenses. Investments appear on a separate line in your VAT return.
Why is it important to classify your expenses correctly for VAT purposes?
Incorrect classification can lead to an incorrect VAT return.
This may result in:
• incorrect VAT recovery
• errors in your declaration
• a risk of audit or fines
Correct classification ensures your administration complies with tax rules and that you do not miss out on recoverable VAT.
Which expenses are considered goods?
Goods are items you purchase to resell.
Examples:
• a clothing store buying stock
• an electrician reselling materials to a client
• a retailer reselling products purchased from a supplier
These purchases must be recorded as goods in your VAT return.
What should you do if you have recorded expenses incorrectly in your VAT return?
Mistakes can happen, especially in your first returns. If you notice that an expense has been classified in the wrong category, you can usually correct it in your next VAT return. If you use PIA Go!, this type of error is often detected quickly and can be corrected easily.
