The VAT reverse-charge mechanism for activities outside the Netherlands
Does your company carry out construction work, installation or assembly supplies outside the Netherlands? Then you may have to deal with the VAT reverse-charge mechanism.
What does the Dutch VAT reverse-charge mechanism entail?
When applying the VAT reverse-charge mechanism, the obligation to pay VAT is transferred to the customer. In that case, the supplier does not have to pay VAT itself. The customer processes the reverse-charged VAT in its own VAT return and deducts it in the same return. The VAT due is therefore €0.
The VAT reverse-charge mechanism when performing activities in another EU Member State
Do you as a Dutch contractor carry out work on immovable property in another EU Member State? In that case, these activities are taxed for VAT in the country where the activities are carried out. In principle, you as a supplier are obliged to charge foreign VAT. You must then pay this foreign VAT in the relevant country. This entails administrative burdens. Consider, for example, the VAT registration.
In many cases it is possible or even mandatory to transfer the VAT to the customer established abroad. However, this is only possible if the relevant foreign national legislation contains a VAT reverse-charge rule. The way in which countries explain the reverse-charge mechanisms differs. This must therefore be assessed per activity and per country. For example, it makes a difference whether work qualifies as an installation service, an installation supply or a service related to immovable property.
If you carry out construction work outside the Netherlands and engage local personnel or subcontractors, the foreign VAT may be reverse-charged to you as the (main) contractor. In that case, the lender or subcontractor may not charge you (local) VAT. If it does happen, the deduction of this VAT may be refused. It is therefore wise to also assess the incoming invoices for their VAT consequences.
Do you require more information?
If you would like advice and/or support with the application of the VAT reverse-charge mechanism, please contact Anne Kin, tax advisor at ABAB International, by telephone on 013-5915125 or send Anne an email.