Consider VAT for cross-border supplies with installation or assembly
Are you a supplier of machines, such as food processing machines, robot arms, cooling and ventilation systems or storage systems such as warehouse racks? In that case, it is important to pay extra attention to cross-border supplies with installation or assembly.
Installation and/or assembly supplies are not always subject to VAT in the Netherlands
When you as a Dutch entrepreneur supply goods with installation or assembly in the Netherlands, the supply of the machine together with the installation or assembly is taxed in the Netherlands with 21% VAT. However, if you supply and install the machine in another European country, Dutch VAT will no longer apply. For European VAT, this transaction is then taxed in the country where the installation or assembly of the supplied machines takes place. Such transactions within the EU must be declared in Section 3c, a special section on the VAT return. Installation or assembly supplies outside the EUdo not appear at all on your Dutch VAT return.
For example, a Dutch entrepreneur supplies a number of machines in Germany on behalf of a German customer and assembles them in the warehouse of its German customer. In concrete terms, this means that the Dutch entrepreneur has a registration obligation with the German tax authorities. The Dutch entrepreneur must pay VAT in Germany. The entrepreneur must therefore send its customer an invoice with German VAT.
Application of the reverse-charge mechanism
Sometimes it is possible to make use of a national reverse-charge mechanism in the country of the customer. In that case, you do not have to register in Germany, for example, and you can then transfer the VAT to your German customer. These reverse-charge mechanisms are very specific and different in all European countries. The various European countries do not apply these reverse-charge mechanisms in a uniform manner. In addition, some countries do not have a reverse-charge mechanism.
Reverse-charge of VAT is not always possible
Often these reverse-charge arrangements cannot be applied if the customer is not established or registered for VAT purposes in the customer's country. For example, a Dutch entrepreneur who supplies and installs machines (or other goods) in Italy on behalf of a Spanish entrepreneur. In this case, the Dutch entrepreneur cannot make use of the Italian reverse-charge mechanism, because it is not possible in Italy to reverse-charge Italian VAT to a party not established in Italy.
Preparation is essential
Through good preparation in advance, it is often possible to reverse-charge the VAT to your customer In addition, you can already take into account possible additional costs in quotations and contracts. To determine whether you can invoke a reverse-charge mechanism in the country of the customer, you must consult the VAT legislation of that country. Pay extra attention to the fact that not every supply of goods with installation or assembly is also an installation or assembly supply for VAT purposes. That is why it is important to analyse the contracts in time to qualify the transaction. Sometimes such a supply can only be a supply of goods or services for VAT purposes. This can be complex in practice and needs to be reviewed by an expert.
Risks are great
Due to the ever-increasing exchange of data and checks, sooner or later entrepreneurs who do not comply with these rules will be notified by the foreign tax authorities. This can happen because they carry out an audit at the customer. Tax officials are also increasingly taking a look at large projects. However, if you identify this problem proactively, you can deal with it effectively and you do not always have to register in the country of the customer.
Do you require more information?
Would you like advice and/or support with VAT for cross-border goods deliveries with installation or assembly work? Please contact Anne Kin, tax advisor at ABAB International, on telephone number 013-5915125 or send Anne an email.