VAT considerations when doing business in the Netherlands
When doing business in the Netherlands, there are many factors to consider, including value-added tax (VAT).
Economic activities in the Netherlands
Dutch VAT (value-added tax) is levied on the supply of goods and services in the Netherlands carried out by a VAT entrepreneur. VAT entrepreneurship arises when sustainable economic activities are carried out for compensation. When the place of supply or place of service for VAT is in the Netherlands, you will generally have to pay VAT in the Netherlands.
Consequences of economic activities in the Netherlands
If you conduct VAT taxable supplies in the Netherlands, you are liable for VAT and must apply for a VAT number. Additionally, you must also file periodic VAT returns in the Netherlands. For filing VAT returns, it is important to classify taxable transactions for VAT. Depending on the classification, there may be 21%, 9%, or 0% VAT. Your transaction may also be exempt from VAT. In principle, input VAT on purchases can be deducted on the VAT return. If you provide exempt transactions, you are not entitled to a VAT deduction. An additional consideration is when you provide both exempt and taxable transactions. In that case, you must apply a pro rata VAT deduction based on the percentage of taxable transactions.
Reverse charge mechanism
In ‘business to business’ situations the Dutch VAT regulations contain extensive reverse charge mechanisms for foreign entrepreneurs. This means that foreign entrepreneurs generally do not have to charge VAT to local (Dutch) entrepreneurs. In those situations the Dutch VAT has to be filed (and paid) by the Dutch entrepreneur.
Import VAT postponement scheme
The Dutch VAT regulation contains an attractive VAT postponement scheme for the import of goods in the EU if the import takes place in the Netherlands. Although certain conditions have to be met to be able to make use of this scheme, it can also be advantageous for foreign entrepreneurs who want to do business in the EU. The import VAT does not have to be paid to the customs authorities, but it can be filed and deducted in the periodic VAT return.
The starting point for the right of VAT deduction is that your invoices and the invoices you receive must comply with the invoice requirements as described in the Dutch VAT regulation. In addition, there may be specific invoice requirements for the performances you provide. Think, for example, of "self-billing," an intra-community supply of goods from the Netherlands, or a VAT reverse-charge mechanism. In such situations, specific wording must be included on the invoice.
If you are not obliged to register for VAT in the Netherlands and Dutch VAT has been charged to you, it is possible to submit a claim for a VAT refund. If you are an entrepreneur established in another EU country, the Dutch VAT can be claimed via a request for a refund made in digital form. The request is made to the tax authorities of the EU country in which you are established. The tax authorities of your country will send the refund to Dutch tax authorities.
If you are an entrepreneur established in a non-EU country, the Dutch VAT that has been charged to you can be claimed via a form. Before you apply for a refund, you must be registered in the Netherlands as a foreign entrepreneur.
- What is the VAT classification of your transaction? Are you supplying goods, providing services, or providing performances with both goods and services aspects?
- Do you perform ‘business to business’ or ‘business to consumer’ transactions? If you perform ‘business to business’ transactions a reverse charge scheme may be applicable.
- Which VAT rate applies?
- What invoice requirements must be met?
- Can input VAT be fully deducted, or is there a pro rata deduction?
- If goods are imported regularly, an import VAT postponement scheme can be applied (conditionally).
Make sure to get well-informed about the VAT consequences when starting business activities in the Netherlands. The Dutch VAT regulation contains many specific regulations, so each specific case must be assessed to determine which regulations apply.
If you want VAT advice and/or support when starting or expanding your business in the Netherlands, please contact Anne Kin, tax advisor ABAB International, via phone +31 135915125 or send Anne an e-mail.