Indirect tax snapshot
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Value Added Tax (VAT) is the main type of indirect taxation in the Netherlands and in other European Union (EU) countries.
It is a tax on consumption which is applied during the production and distribution process to most goods and services. It is also applied to goods, and certain services, entering the country. Although VAT is ultimately borne by the consumer by being included in the price paid, the responsibility for charging, collecting and paying it to the tax authority at each stage of the process rests with the business making the supply, ie the sale.
A business registered for the tax will charge VAT (output tax) on its sales, and incur VAT (input tax) on its purchases (including any VAT paid at importation). The difference between the output tax and the deductible input tax in each accounting period will be the amount of VAT payable by the business to the tax authority. Where the input tax exceeds the output tax, a refund can be claimed.
A transaction is within the scope of Dutch VAT if the following conditions are met:
- it is a supply of goods or Although the term ‘supply’ is not defined in the legislation, it has a broad interpretation
- it (is deemed to) takes place in the Netherlands
- it is made by a taxable For these purposes, a taxable person is a person or entity who is registered for VAT in the Netherlands, or has a liability to become registered
- it is made in the course or furtherance of any business carried on by that person or entity.
There are three rates of VAT that are applied to goods and services in the Netherlands; the standard rate, the reduced rate, and the zero rate. Special rates may apply to farmers. In addition, some goods and services are exempted from the tax.
Businesses that make exempt supplies are – in general – unable to claim any input tax that they incur in relation to those supplies, so the VAT paid to suppliers will be a ‘real’ cost.
Most goods imported into the Netherlands from outside the EU are subject to VAT. The tax will have to be paid by the importer at the time of importation. Where the importation is for business purposes, then the importer may be able to reclaim the tax (subject to certain rules). However, it’s possible to postpone payment of import VAT to the periodic VAT return, hence no cash-flow occurs (referred to as an “import VAT deferment” or “the reverse charge VAT on import”).
Depending on the type of goods this import VAT deferment is either obligatory (if certain raw materials are imported) or the importer can make use of a special deferment license (“an Article 23 license”). Dutch legal entities and fixed establishments can apply for an Article 23 license to import goods from non-EU countries. With this license, importers avoid payment of VAT at the time of importation. The import VAT is shifted to the VAT return instead.
A taxable person not established in the Netherlands (a “non-resident”) will not be able to shift the import VAT to the VAT return unless it appoints a fiscal representative. A non-resident can either appoint a limited fiscal representative or a general fiscal representative for the import of goods in the Netherlands. When a general fiscal representative is appointed, it can report all purchases and supplies of a non-resident but the non-resident should be registered for VAT in the Netherlands itself. A limited fiscal representative can be used only for reporting the importation of the goods and a subsequent supply. If the non-resident appoints a limited fiscal representative, it does not need to be registered for VAT purposes in the Netherlands itself.
It is also important to note the interaction between VAT and customs duty. Customs duty is levied across the EU at the place where goods are imported into the EU. Once duty (and VAT) has been paid by the importer, the goods are in ‘free circulation’ and they can then be released for use in the EU market. Unlike other indirect taxes, such as VAT, once customs duty has been paid it is not recoverable by the importer. It therefore represents a bottom line cost to the importing business if it cannot be passed on in higher prices.
It is therefore very important to ensure that the correct rate of duty is applied. VAT is charged on the value of the importation, including any custom and excise duty.
A ‘person’ who either makes or intends to make taxable supplies of goods or services in the course or furtherance of a business must register for VAT .
For these purposes, a ‘person’ includes any legal entity or a natural person. Therefore, once a person is registered for VAT, all of his business activities will be covered by the registration – even if the nature of some of those activities are very different.
Two or more corporate bodies can be registered together as a VAT group if:
- each of the bodies is established, or has a fixed establishment, in the Netherlands
- they satisfy the ‘control’ test, ie one of them controls each of the others, or one person or a business partnership controls all of them
- each of the bodies perform more or less the same economic activities.
A corporate body cannot be treated as a member of more than one VAT group at a time.
The main advantage of VAT group registration is that, apart from a few limited exceptions, any supply of goods or services by a member of the group to another member of the group is disregarded for VAT purposes. This reduces the risk of VAT being accidentally omitted on supplies between separately registered connected companies.
However, there are some disadvantages and any decision on whether to group register should be taken with care. For example, all VAT group members (including former members) could be jointly and severally liable for the VAT debt of the group during the period of their membership.
No. There is no registration limit for businesses that are not established in the Netherlands and they will need to register as soon as they start to make taxable transactions in the Netherlands.
Different registration requirements apply to businesses involved with ‘distance sales’ made within the European Union (EU) eg mail order and internet sales.
Registration for VAT in the Netherlands may be required where a non-established EU business is involved with distance selling. Distance selling occurs when a taxable supplier supplies and delivers goods from one EU country to a customer in another EU country who is not registered or liable to be registered for VAT. Such customers are known as non-taxable persons, and include private individuals and businesses and other organisations that are not registered for VAT (either because of their size, or the fact that they are exempt from having to register due to the nature of their activities). The common examples of distance sales are goods supplied by mail order and via the internet.
From 1 July 2021, the country-by-country thresholds of either €35,000 or €100,000 set by each EU country for distance selling within EU have been replaced with a single pan-EU threshold of €10,000. This threshold applies to the total cross-border sales by the business across the EU (and NI) and not, as previously, on a country-by-country basis. No threshold applies for businesses who are not established in the NI or EU who have to register immediately when having distance sales within the EU.
This means that when an EU/NI business (who has cross-border pan-European sales above the threshold of €10,000) or a non-EU businesses (no threshold applies) sells goods to the non-VAT registered customers located in the Netherlands, then:
- the supplier becomes liable to register for VAT in the Netherlands
- the Netherlands becomes the place of supply
- any further sales to customers in the Netherlands are subject to Dutch VAT.
Alternatively, the business could opt for online One Stop Shop (OSS). To ease the administrative burden of businesses having to register in each EU member state where they have customers, there is a new opt-in online One Stop Shop (OSS) quarterly VAT reporting and payment system. This means that businesses falling in scope of the new distance selling rules in effect from 1 July 2021 are not required to VAT register in each of the EU country of their customers if they opt for OSS.
However, the OSS cannot be used to report local sales or intra-Community deliveries for which local Dutch registration may be still required.
With effect 1 January, 2015, Article 58 of Directive 2006/112/ EC was amended. The rules determining the place of supply of electronically supplied services supplied to private consumers (B2C) changed from the Member State where the supplier belongs (ie where established) to the Member State of the consumer. The result of this is that local VAT is chargeable at the applicable rate in each of the Member States in which electronically supplied services are made (ie where the customer belongs). To ensure compliance with this, suppliers have the choice to either register for VAT in each Member State where their customers reside, or elect to register under the EU VAT OSS simplification scheme in a single Member State.
Businesses with multiple establishments in the EU can choose which Member State to operate OSS (the Member State of Identification). However, the OSS cannot be used to report local sales to customers in a Member State in which suppliers of electronically supplied services have a fixed establishment. Non-EU suppliers without an establishment in a Member State are free to select a Member State of their choosing to operate OSS and become their Member State of Identification.
Appointing a fiscal representative is required if a non-EU business effects EU distance sales in the Netherlands. It is also required if a non-resident wants to apply the reverse charge VAT on import (i.e. to obtain an article 23 license) or sell the goods in certain bonded warehouses.
Article 33a of the VAT Act offers non-resident taxable persons (taxable persons not established in the Netherlands and not having a fixed establishment in the Netherlands) the opportunity to appoint a Dutch fiscal representative in relation to their VAT obligations. According to article 24c(4) and (5) of the VAT Implementing Decree, a general or a limited license may be granted to a fiscal representative.
The advantage of appointing a general fiscal representative as opposed to a limited fiscal representative is that not only an importation of the goods and a subsequent supply but also intracommunity acquisitions and domestic purchases can be reported by the general fiscal representative.
A fiscal representative with a general license acts on behalf of a non-resident taxable person with respect to all his supplies of goods and services for which Dutch VAT is due, intra- Community acquisitions and importation of products, unless a fiscal representative with a limited license is appointed for those transactions. A non-resident entrepreneur may use the services of a general fiscal representative only after registering for VAT itself. A non-resident taxable person may use the services of only one general fiscal representative. If a non- resident company has appointed a Dutch fiscal representative with a general license, the representative’s VAT identification number, full name and address need to be indicated on the invoices raised by the non-resident company.
When companies established outside the EU make distance sales to private persons or equivalent persons in the Netherlands, a fiscal representative with a general license must be appointed.
A license to act as a general taxable person may be granted, upon written request, to an entrepreneur established in the Netherlands if certain conditions are met and if the original power of attorney signed by the principal is enclosed. A fixed establishment of a non-resident taxable person may not act as a fiscal representative with a general license. The general representative is required to provide a bond (cash or bank guarantee). His joint and several liability in respect of his client’s transactions is limited to the amount of this bank guarantee.
A fiscal representative with a limited license can represent a non-resident taxable person for a limited number of transactions. According to article 24c(5a) of the VAT Implementing Order, as a general rule, a fiscal representative with a limited license may act as such with respect to:
- the importation of products into the territory of the Netherlands and the subsequent supply of the goods
- the supply of goods subject to the zero rate according to Table II(a)(7) and (8) of the VAT Act (excise and bulk products)
- export and intra-Community supplies subject to the zero rate according to Table II(a)(2) or (a)(6) of the VAT Act.
A non-resident taxable person, using the professional services of a fiscal representative with a limited license is not required to register for VAT himself. He can use the VAT identification number of the limited representative. When making intra-Community transactions, the VAT identification number of the representative must be indicated on the invoice.
A Dutch entrepreneur may be granted a license to act as a limited fiscal representative. A fixed establishment of a non-resident taxable person may not act as such. It is permitted that certificates on the taxable status of the applicant are not attached to the request but kept in the administration of the limited representative. The limited representative is jointly and severally liable for the VAT due on the transactions for which he operates as a limited VAT representative. He is also required to provide a bond (cash or bank guarantee).
VAT returns normally cover a calendar quarter ending on the last day of a calendar month, taxpayers can apply to submit returns on a monthly basis.
All VAT returns have to be submitted within the next month following the relevant accounting period, together with any tax due. VAT returns has to be submitted electronically.
Non-resident business may file a return within the end of the second month following the relevant accounting period, together with the VAT due. VAT returns have to submitted electronically.
Yes. A range of penalties can be imposed where businesses do not comply with the VAT rules.
Civil penalties and interest can be applied for errors and omissions made on tax returns, or where the tax is paid late. Penalties can also be applied where the business has failed to maintain adequate records, provide information (including additional declarations), or makes repeated mistakes.
Criminal proceedings may be brought in the case of more serious matters.
Yes, it may be possible to reclaim the VAT incurred in certain circumstances.
Two schemes exist, one for businesses established in the EU and another for businesses established elsewhere.
The EU cross border refund scheme is available in all EU member states, and enables a business established in an EU country to recover VAT incurred in another member state. To be eligible to make a claim, the claimant must be a taxable person established in an EU member state other than the one from which the claim is to be sought. In addition, the claimant:
- must not be registered, liable, or eligible to be registered in the member state from which he is claiming the refund
- must have no fixed establishment, seat of economic activity, place of business or other residence there
- during the refund period he must not have supplied any goods or services in the member state of refund, apart from certain limited exceptions.
The amount that is refundable is determined by the deduction rules that apply in the country of the refund. The claim is submitted electronically to the tax authority of the EU country where the claimant is established.
The refund period must not cover more than one calendar year or less than three calendar months – unless it is covering the remainder of a calendar year. The claim has to be made by 30 September of the year following that in which the VAT was incurred.
Businesses established outside of the EU can, subject to certain conditions, also reclaim the VAT incurred on imports into the Netherlands or purchases of goods and services used in the Netherlands.
Non-EU businesses can recover any Dutch VAT incurred using the so-called 13th Directive procedure under which the claim is submitted directly to the Dutch tax authorities.
The Netherlands allows a VAT refund to all non-EU businesses without requiring a reciprocal treatment in the claimant’s country.
The scheme is available to any person carrying on a business established in a third country, ie outside the EU, provided that in the period of the claim:
- he was not registered or liable to be registered for VAT in the Netherlands
- he was not established in any EU country
- he made no supplies of goods and services in the Netherlands other than certain specified exceptions.
The deadline for annual claims is generally 30 June of the year following the calendar year when the expenses were incurred for a non-EU business.
The Dutch VAT could be asked back over last 5 years
Both EU and non-EU businesses can reclaim Dutch VAT within five calendar years from the end of the calendar year in which the VAT was incurred, however, in order to have the right to appeal the decision of the tax authorities, the claim must be submitted within certain time limits.
If a claim is not made within time limits, no appeal is possible.
For example, in 2022, a non-resident can still reclaim VAT for years 2017 until 2021. However, in order to have the right to appeal the decision of the tax authorities, the claim must be submitted within time limits. For example, if you submit in 2022, a claim for the years 2017 to 2020, then you do not have the right of appeal to the courts against the decision of the tax authorities.
A VAT invoice must show:
- an invoice number which is unique and sequential
- the seller’s name and address
- the seller’s VAT registration number
- the invoice date
- the time of supply (also known as tax point) if this is different from the invoice date
- the customer’s name and address
- a description sufficient to identify the goods or services supplied to the customer
- the rate of any cash discount
- the total amount of VAT charged expressed in Euros.
For each different type of item listed on the invoice, the following must be shown:
- the unit price or rate, excluding VAT
- the quantity of goods or the extent of the services
- the rate of VAT that applies to what’s being sold
- the total amount payable, excluding VAT.
Where a VAT invoice includes zero-rated or exempt goods or services, it must:
- show clearly that there is no VAT payable on those goods or services
- show the total of those values separately.
Where a business makes retail sales and makes a sale of goods or services for €100 or less including VAT, a simplified VAT invoice can be issued.
VAT invoices can be issued, received and stored in electronic format and there is no need to tell the tax authority. Electronic invoices must contain the same information as paper invoices. The method used to ensure the authenticity of origin, the integrity of content and legibility of the invoices is a business choice and can be achieved by any business controls which create a reliable audit trail between an invoice and a supply of goods or services.
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