How does the Dutch VAT system work?

Last updated: 04-10-2013

How does the Dutch VAT system work?

VAT is – in general - a consumption tax, which is supposed to be ultimately born by the consumer (i.e. consumer tax). 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 will act as the withholding agent for the Dutch tax authorities.

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. Exceptions to this main rule relate to specific VAT exempt supplies of goods and services, such as medical services, services provided by educational establishments, most services provided by banks etc.

National supplies

Supply of goods or services to customers in the Netherlands is a national supply on which Dutch VAT is due (21%). Therefore, a Dutch entrepreneur should invoice its customer including Dutch VAT; the customer pays the invoice (including VAT) to this entrepreneur which on its turn declares the VAT to the Dutch tax authorities. Please note in this respect that VAT becomes due at “the time of supply”, this means when the goods are delivered (normally the time of supply equals to the invoice date) and typically not when the customer paid the invoice. The customer, being an entrepreneur, is entitled to deduct the VAT incurred in its VAT declaration.

Cross-border supplies

For cross-border supply of goods and services special rules apply, which can be briefly explained as follows. With respect to goods, the following applies. In case your business exports for instance goods from the Netherlands to other EU Member States, this supply is regarded as a so-called intra-community supply of goods. This intra-community supply is subject to 0% VAT, if certain conditions are met. The recipient of the goods will receive a so-called intra-community delivery of goods. The main rule is that the recipient of the goods should report the intra-community delivery of goods in its tax return. The recipient shall have to pay VAT due. However, normally, the recipient of the goods is also allowed to deduct this VAT due (this will depend on the activities of the recipient and whether it performs taxable activities. In case of non-taxable activities, the recipient will have to pay the VAT on the goods received.). This procedure is commonly known as the “reverse charge rule”.

In order to qualify for the 0% VAT for intra-community supply of goods, it is important that two conditions are met:

  • Your business transports the goods to another EU Member State. You must be able to demonstrate the transport of the goods (for example: order forms, order confirmation and transport documents);
  • Your customer is an entrepreneur. He has a VAT identification number in the country where the goods have been delivered.

If these conditions are not met, for instance because the customer is a private individual or it does not have a VAT identification number, then the 0% rate does not apply. In that case, Dutch VAT is to be calculated.

With respect to the cross-border supply of services, it will be important to assess whether the services are supplied to business and/or private individuals (consumer). The VAT treatment will depend to whom the services are (to be) performed.

Dutch VAT rates

The Dutch standard VAT rate is 21% (as per 1st of October 2012) and applies to most goods and services. The Dutch rate is average in comparison to other EU member states (see under Reduced and Standard VAT-rates in 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.

Exports of goods are zero-rated, as is the export of certain services, although special procedures must be followed to be allowed to claim the VAT zero rate on exports. The intra-community supply of products to a customer being a VAT entrepreneur, in another EU Member State is also zero rated.
The conditions for successfully claiming the VAT zero rate is different for supplies of goods to other EU Member States and export of goods to third countries.

VAT exemptions

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. Below, we provide a non-exhaustive list of exempt transactions:

  • The transfer or rental of immovable property, with certain exceptions. For example, the delivery of newly-built property until two years after it is first used, and property when the supplier and recipient have opted for taxable delivery are taxable; however the possibility to opt for taxation is restricted to situations in which the property is used for (almost) wholly taxable purposes;
  • Medical services;
  • Services provided by educational establishments;
  • Social-cultural services;
  • Most services performed by banks;
  • Insurance transactions;
  • Non-commercial activities by public radio and television broadcasting organizations;
  • Postal services;
  • Burials/cremations;
  • Sports (not entrance fees); or
  • The services of composers, writers and journalists.

If you are active in such a line of business, you are in general 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.

What can we do for you?

Advice on the VAT status of your company

Clarifying the VAT implications of (cross-border) transactions

Dealing with VAT registration and VAT compliance matters

Representation in VAT audits

If you are interested in our services, please feel free to contact us via e-mail or to call us at our office in Amsterdam at the number +31 (20) 5709440 or our office in Rotterdam at the number + 31 (10) 2010466.

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