The Dutch Value Added Tax (VAT) system
|Who is subject to VAT?|
|How does the Dutch VAT work?|
|Dutch VAT rates|
|Export and import|
|Dutch invoicing requirements|
|VAT refund for foreign entrepreneurs|
|What can we do for you ?|
When you start up a business in the Netherlands or if you intend to supply goods or services to Dutch customers you will be confronted with the Dutch system of Value Added Tax ("VAT" in Dutch "BTW").
If you start up a business in the Netherlands you are required to register for VAT purposes. The same can apply if you do not have a Dutch presence but you are supplying goods or services to Dutch customers. This is for instance the standard rule if a foreign company provides E-commerce services to the Dutch market.
Special rules apply to holding companies.
The Dutch value added tax (VAT or spelled in the Netherlands as "BTW") is a general consumption tax, which is supposed to be ultimately born by the consumer. The VAT is included in the retail price of basically all goods and services. In general, the VAT must be included in the invoice issued by the supplier of goods or services. As a matter of fact, businesses function as the withholding agent for the Dutch tax authorities.
VAT - incorporated in Dutch tax law - is based upon EU Directives. This means that the principles and the structure of the tax are in general the same throughout the whole EU. Member states are however free to determine their domestic rates and turnover limits for registration.
Though VAT is in essence a consumer tax, it is to be charged throughout every stage of the supply chain. This means that in general every invoice issued by your business - irrespective at what step in the supply chain - should include VAT and every invoice your business receives includes VAT as well.
The Dutch standard VAT rate is 21% and applies to most goods and services. The Dutch rate is average in comparison to other EU member states (see under the rate in other EU - member states).
A 6% rate applies to for example food and beverage for human consumption (except for alcoholics), water, pharmaceutical products and medical aids for persons and animals, books and magazines, passenger transport, hotel accommodations, entrance for sports events, theatres, cinemas, music performances, zoos, etc.
A 0% rate applies to exports and intra-community (EU) supplies (see hereunder).
A number of transactions - mainly in the financial (banking/insurances) and property sector but also various medical services and certain types of education - are tax exempt.
If you are active in such a line of business, in general you are not allowed to charge VAT on your invoices and in addition input VAT is not refundable. VAT may then become a cost for your business.
It may be that your company performs both taxable and exempt transactions. In such case it is only allowed to deduct input VAT to the extent it relates to taxable transactions (pro-rata calculation). Therefore it is recommendable to get a clear picture in advance of how you will structure your business in order to be allowed to maximum VAT relief.
In brief the system to imports/exports and intra community supplies works as follows.
When you purchase goods from outside the EU, these goods are subject to VAT at the moment the goods are imported in the Netherlands. Supplies of goods to customers outside the EU are in general not subject to VAT. With regard to the import of certain goods import duties may become due.
When you acquire goods from a supplier in another EU member state (a so called intra community acquisition) the goods will in general be subject to Dutch VAT (VAT is shifted). For supply of goods to customers (entrepreneurs) in other EU member states (so called intra community supply) conditionally you are entitled to the 0%-rate there where the recipient of the goods needs to self assess local VAT due. Various conditions should be met to apply this EU regime (see also invoicing requirements below).
Like in most countries, leasing is a separate chapter within the Dutch VAT system.
There is extensive policy about the qualification of leases and for certain specific situations special rules can apply.
In essence, a lease can be treated as either a delivery of goods or a rendering of services. If according to certain criteria the lease qualifies as a finance lease, the lease will for Dutch VAT purposes be considered a delivery of goods. In other situations, the lease will be qualified as the providing of services.
Various criteria must be met for the qualification of a lease as finance lease. The legal criteria are aimed to determine who is in fact the beneficial owner of the asset.
When you are active in the e-commerce business, special VAT rules may be applicable.
Under these rules - due to the introductions of a EU Directive mid 2003- a digital service supplier established outside the EU supplying digital services to a non-taxable person established or residing within the EU is in most cases obliged to charge VAT to that customer at the rate applicable in the country of the customer.
For the purpose of the EU directive, digital services include the electronic transmission of software, games and information in a broad sense, as well as the subscription to radio and television channels, pay per view and other services supplied online via (international) databases and networks.
Invoicing requirements are incorporated in Dutch tax law which are based upon a EU directive, which include the obligation to put your customer’s VAT number on the invoice and provide additional information identifying the VAT liability of certain supplies/services.
It is relevant for your business to comply with the invoicing requirements in order to prevent penalties. Furthermore, your customer, being the recipient of an incorrect invoice, may experience difficulties reclaiming VAT on the incorrect invoices it received.
The specific information that you have to include in the invoice:
- Date of issuance invoice
- A sequential number
- Your VAT identification number
- The VAT identification number of your customer (if required by the nature of the supply)
- Your full name and address as well as the full name and address of your customer
- A description of the goods and services supplied (second hand goods are to be identified)
- The quantity of the goods supplied or services rendered
- The date the goods were supplied or the services were rendered
- The net amount subject to VAT, the applicable VAT rate and the amount of VAT due
- Identification of exempt supplies or supplies where the customer has to pay the VAT (self assessment or "verleggingsregeling") Identification of tax representatives when used
It is allowed to issue electronic invoices, provided that the origin and integrity of the invoice is guaranteed. It is furthermore noted that records are to be kept of copies of invoices for a period of at least seven years. This obligation applies equally to paper and electronic invoices.
VAT tax returns have to be filed with the tax authorities on a monthly or quarterly basis, depending on the size of your business. From the VAT you charged on your sales (output VAT) you should deduct the VAT that has been charged to you by other businesses (input VAT). The balance is either to be paid to the tax authorities (output VAT exceeds input VAT) or to be refunded to you by the tax authorities (input VAT exceeds output VAT). In essence, the VAT system should be tax neutral for businesses which are fully subject to the VAT.
In particular for intra-community delivery of goods extensive reporting requirements exist.
Foreign entrepreneurs who have no taxable presence for VAT purposes in the Netherlands are eligible for a refund of the Dutch VAT they have incurred.
Within 6 months after the calendar in which the VAT has been incurred the foreign entrepreneur must file a request for refund. In this request the original invoices should be provided. Specific requirements apply to evidence that the foreign company is indeed a entrepreneur according to the Dutch definition. The request can be filed once a quarter, once a half year or once a year.
Not all VAT is refundable. The normal limitations apply. For instance the VAT relating to meals and drinks is in general not refundable.
|Advice on VAT issues|
|Clarifying the VAT implications of (cross border) leases|
|Negotiation tax rulings|
|Representation in VAT audits|
|Dealing with registration and compliance matters|
If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Rotterdam at the number +31 (10) 2010466 or our office in Amsterdam at the number + 31 (20) 5709440
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