Vat

Requirements

This article will explain the basic rules concerning Value Added Tax in The Netherlands, and how your Dutch company should comply with the VAT requirements.


All international companies can apply for a VAT number in The Netherlands, even if your company is not started in The Netherlands. Once your company has obtained a VAT number or started its business in The Netherlands, it should consider the following VAT requirements:



IMPORTANT FACTS


  • Any international business can apply for a Dutch VAT number

  • There is no need to open a Dutch bank account, to even to reclaim VAT

  • There are different VAT ID application procedures resident and non-resident companies

  • It’s important to confirm your VAT liabilities in case of ‘ABC’ transactions in which your EU supplier delivers goods directly to your EU buyer (B2B)

  • The definitions ‘sales tax’ and ‘VAT’ are often used interchangeably, but they mean the same thing.

  • Important! Entrepreneurs and self-employed persons who are in trouble due to the corona crisis can ask the Tax and Customs Administration to postpone payment. (in normal circumstances, the VAT is paid to the Tax Administration within 1 month after the quarter has ended)

What is VAT & Who pays VAT in The Netherlands?

 

Value Added Tax, also known as sales tax, means that it is a tax that is levied on the value that is created by an entrepreneur  to a product or service. In other words: the difference between his purchase price plus expenses and the selling price.

It is important to know who has to pay sales tax for a particular taxed transaction. A distinction must be made between:


  • sales tax for supplies and services;

  • sales tax on import;

  • sales tax on intra-Community acquisitions.


The main rule is that the tax for supplies and services must be paid by the entrepreneur who performs the supply or service. In this context, special attention is required when setting up a BV. The fact that, for example, the legal person ratifies certain legal acts after its establishment is irrelevant. For services rendered before the date of incorporation by the founder (s), the latter is therefore regarded as a taxable person, the BV is first regarded as a taxable person for the services provided by the BV after that date.


In a number of cases, however, the tax is levied on the purchasers of the relevant service. This is called a reverse charge mechanism. This is the case, for example, with certain performances by foreign entrepreneurs and subcontractors / lenders, while this also applies to certain transactions involving immovable property. There is also a mandatory reverse charge mechanism for B2B services in the EU.


The charge (and reclaim) of the VAT is done in every phase of the production chain, from manufacturer to wholesaler to store. Ultimately, it is the consumer who pays the VAT and is not able to reclaim it. And with that, we have arrived at what the VAT really is: a consumption tax.’


The VAT ID looks like this:

the country code NL

9 (random) numbers

the letter "B"

a check digit of 2 digits

Example VAT identification number: NL 00099998B57.


Using your VAT number


You must state your VAT ID on your invoices. The date you put on your invoice determines the declaration date. So do you send an invoice on September 15? Then you must include the VAT on this invoice in your 3rd quarter VAT return. Even if you have not received the payment for this invoice in the 3rd quarter.


Do you sell via the Internet or do you offer your services there? Please clearly state your VAT ID number on your website.

Do I have to register for VAT in The Netherlands?

 

You need a sales tax/VAT number to file a VAT return.


Most entrepreneurs file a digital VAT return every quarter. Do you have to pay more than 15,000 euros per quarter in VAT? Then you have to file a VAT return every month.


The VAT return must be made within 1 month after your tax return period. The first quarter ends March 31. This means that you have 1 month for your declaration. Your declaration must therefore be arranged on 30 April.


Do you use the small business scheme (KOR)? Then you do not have to file a VAT return. But you can therefore not reclaim VAT. (Please note that the KOR scheme is not applicable for non-resident companies)

How do I apply for a resident VAT number?

 

Before applying for the resident VAT number, one must first consider whether all the substance requirements are satisfied. The moment when all the conditions are achieved, you can send out the request to the Tax Authority.

How do I apply for a non-resident VAT number?

 

The non-resident application is the fastest procedure as it requires much less investigation by the Tax Authority.

In case one or more of the following questions apply to you, you qualify for a non-resident VAT number in the Netherlands.


  • Do you sell goods to private individuals in the Netherlands?

  • Do you sell goods to individuals from other EU countries from the Netherlands?

  • Do you sell goods to other foreign entrepreneurs in the Netherlands?

  • Do you sell goods to entrepreneurs from other EU countries

  • (intra-Community supplies) from the Netherlands?

  • Do you bring your own goods from the Netherlands to another EU country?

  • Do you sell goods to customers outside the EU from the Netherlands?

  • Do you have intra-Community acquisitions (ICA) in the Netherlands?

  • Did you receive any invoices with Dutch VAT that has been reserve-charged to you?

  • Do you have other deliveries in the Netherlands subject to VAT?

  • Do you charge VAT for services provided in the Netherland


When these questions are answered with “yes” then you are an entrepreneur in terms of VAT. In this case, you need to file a tax return and you may also be required to pay VAT.

It’s important to realize that no Dutch VAT number will be granted if the BV is not actually located in the Netherlands and there are no business activities in the Netherlands. There is extra attention from the tax authorities in case of a virtual address.

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What are the two types of VAT numbers?

 

A company that is registered in the Netherlands can either obtain a resident or a non-resident VAT number.


1. The resident VAT number


The resident VAT number in the Netherlands requires a company to fulfil several substance requirements before it can be considered a ‘resident’ company. At this moment, the tax authorities focus on the office, mainly because a Dutch BV does not show any other substance in the Netherlands. If you can provide other evidence to show that the company does have an actual business (or have facilities to run an actual business) in the Netherlands, the VAT still can be activated. Having a virtual office is legal in the Netherlands.


There might be two options for you:


  • Renting a physical office (and/or hire an employee to work there) to create a substance on the permanent establishment.

  • Provide documents to show that he has suppliers or clients in the Netherlands, to create substance on business activities. Some contracts or invoices would be very helpful. An "outgoing" invoice to a Dutch customer (individual or legal entity) would be preferable because it is mandatory to have a VAT number if a company provides services in the Netherlands.


Aside from the practical matter, there is also the legal matter. The application of a VAT registration number in the Netherlands means, that there should be a 'permanent establishment' from which the client operates. In case such a permanent establishment is not present, the tax authorities can reject/revoke a Dutch VAT number, and they can suggest applying for a non-resident VAT number.

2. The non-resident VAT number


Non-resident companies doing business in the Netherlands may have to file a VAT return (turnover tax, BTW) in the Netherlands.


If so, they need to do a VAT registration with the Dutch Tax and Customs Administration.


The place of a service provided for an entrepreneur is the place where that entrepreneur has established the seat of his business activities. If the entrepreneur, who provides a service as referred to above, does not live or is established in the Netherlands and does not have a permanent establishment from which the service is provided, and the customer is assigned a VAT identification number in the Netherlands, the sales tax is levied on the person to whom the delivery is made or the service is provided. In those cases, therefore, there is a shift of the levy from the supplier to the buyer.

  1. he performs a taxable supply of goods or a service in the Netherlands;

  2. the permanent establishment in the Netherlands is not involved in the provision of that goods or service.


A permanent establishment is otherwise a business establishment that is operated with a certain sustainability, from which supplies and services are performed on behalf of the foreign entrepreneur. Think of a factory, workshop or sales area. No permanent establishment is a space for advertising purposes, providing or obtaining information or conducting investigations. According to a Court of Justice, the fact that an entrepreneur was not actually established in Liechtenstein and only functioned there as a letterbox company, by definition, meant that the place of business cannot be located in Liechtenstein and that there is also no permanent establishment. A permanent establishment, including the head office abroad, can form part of a fiscal unity.


Incidentally, it is up to the inspector to demonstrate, where appropriate, that there is a permanent establishment ( UN 2004 / 30.21).


If there is no permanent establishment in the Netherlands, the foreign entrepreneur will therefore interfere with the Dutch tax authorities in the following cases:


  • for supplies and services in the Netherlands to persons other than entrepreneurs and bodies / non-entrepreneurs;

  • for supplies and services in the Netherlands to other foreign entrepreneurs without a permanent establishment in the Netherlands;

  • when applying the margin scheme on the basis of art. 28b , 28c or 28d Law OB 1968.


The electronic services provided by an entrepreneur living or established outside the EU (a so-called non-EU provider) are provided in the Netherlands if the actual use and actual exploitation take place in the Netherlands. This concerns electronic services that are provided to natural persons or bodies established in the Netherlands within the meaning of the AWR (foundations and associations) other than entrepreneurs. Services of non-EU providers to private individuals and other non-entrepreneurs are therefore taxed in the Netherlands. Those non-EU providers must themselves declare the relevant services. Special rules also apply to this declaration, called notification.


If the foreign entrepreneur is himself liable for tax, the turnover tax owed must be paid by the foreign entrepreneur himself. Responsible for these cases is the Tax and Customs Administration, Foreign Office in Heerlen. These entrepreneurs will also be able to pay the turnover tax on the traditional, paper declaration.


They can also deduct the Dutch turnover tax charged to them by other entrepreneurs or paid by them (or on their behalf) upon import, on the declaration that the foreign entrepreneurs must submit. If this reduction leads to a negative balance of the declaration, this balance will be returned.

 

VAT tariffs in the Netherlands

In the Netherlands there are 3 VAT rates applicable:

  • 0% rate

  • 9% rate

  • 21% rate

0% rate


The 0 percent rate is applicable to entrepreneurs conducting business from the Netherlands to foreign countries. For example:


  • The supply of goods from the Netherlands to another EU country;

  • Services provided within the Netherlands, for example, services related with cross-border transactions;

  • International transport of passengers.

More information about the 0% rate can be found on the website of the Belastingdienst and on this website.

Please note that when the 0% rate is applicable you can still deduct VAT. When a company is VAT exempt this company cannot deduct VAT.


9% rate


As from the first of January 2019 the low rate of 6% is increased to 9%. The 9% rate is applicable on basic necessities of life, such as:


  • food

  • drinks

  • agricultural products and services

  • medicines

  • books

  • etc

At the website of the Belastingdienst you can find an extensive overview of the type of goods and services to which the 9% rate is applicable. This list is only available in Dutch.


21% rate


When the 0% or 9% rate are not applicable then you must charge the standard VAT rate of  21%.


Exemptions


Tax is not levied in all cases in which entrepreneurs make taxable supplies of goods or services. Indeed, a number of supplies and services and also a number of cases of importation of goods are exempt from turnover tax. We already note that the entrepreneur must demonstrate the application of the exemptions on the basis of data from the accounts.

Below is an overview of the applicable exemptions.


  • Immovable property

  • Hospitals, retirement homes, etc.

  • Youth work

  • Sports

  • Socio-cultural

  • Medical sector

  • Funeral services

  • Coins and securities

  • Money exchange

  • Insurance

  • Games of chance

  • Koninklijke PostNL BV

  • Radio and television

  • Education

  • Lectures

  • Composers, writers and journalists

  • Organizations

  • Fundraising

  • Supply of used business assets


Transactions between a permanent establishment and the so-called main house are not subject to taxation.

Taxable Facts for VAT purposes in the Netherlands

 

The events that may give rise to sales tax, the taxable events, can be divided into three categories, namely:

a. deliveries of goods and services, which are performed in the Netherlands by an entrepreneur within the framework of his business;

b. intra-Community acquisitions of goods in the Netherlands by entrepreneurs in the context of their business, and by legal persons other than entrepreneurs, as well as intra-Community acquisitions of new means of transport in the Netherlands;

c. import of goods (art. 1 of the law).

When there is a taxable event, this does not mean that turnover tax is due. In certain cases, an exemption from turnover tax applies, as shown below in this article.


Supplies and services by entrepreneurs only exist if the following conditions are met:


1. There must be an achievement by an entrepreneur. In principle, therefore, performances by non-entrepreneurs cannot be subject to taxation. In addition, the entrepreneur must perform the performance within the framework of his company. Performance of the entrepreneur in the capacity of a private person is therefore not subject to sales tax.

2. The performance must meet the legal definition of the term 'delivery of goods' or 'services'.

3. The delivery or service must have been performed in the Netherlands, bearing in mind that the place of performance is precisely defined by law; the place of the actual act cannot therefore be taken as a starting point.


Each of these three conditions is detailed below.


Entrepreneur or Enterprise


Entrepreneur is anyone who independently conducts a business or profession (Article 7 (1) of the Act). This means that no distinction is made between natural and legal persons, nor between persons living or established in the Netherlands and persons abroad. Incidentally, the term 'entrepreneur' does not only include natural and legal persons; any form of cooperation that acts as such in society can be an entrepreneur. Examples are partnerships and partnerships. In contrast to income and corporation tax, turnover tax is not the size of the entrepreneur, but the partnership. Another difference with income and corporate tax is that it is not necessary for entrepreneurship to aim for profit. Nor is it the case that a specific legal form, for example a BV, in itself is sufficient for entrepreneurship. For example, someone who only performs services free of charge is not an entrepreneur.


Running a business means that there must be an organization of capital and labor. If the factor labor is so predominant that the factor capital is only of secondary importance, one speaks of the exercise of a profession. This has been equated with running a business. It may also be that all emphasis is on the aspect of capital. In that case, asset management is involved. In many cases asset management is also equated with running a business.


Someone who exclusively performs services free of charge is not an entrepreneur. This does not mean that all services are performed for free as a non-entrepreneur. If an entrepreneur provides services free of charge, he does so as an entrepreneur if those services are performed within the organizational framework of his enterprise and if those services are also performed in the course of economic transactions, that is to say for the sake of any economic interest involved. This is the case, for example, with the delivery of advertising material.


It is also necessary to satisfy the organization of capital and labor in a sustainable endeavor. This means that someone who only occasionally provides a delivery or service cannot be an entrepreneur.


For example, no entrepreneur is:


  • the private individual who sporadically also acts as an examiner;

  • the private individual who sells his stamp collection;

  • the collector of old postcards that regularly visit exchange fairs;

  • a BV (non-entrepreneur) that occasionally sells a parcel of land 'without effort';

  • a charity that sells a one-time package of shares;

  • the holding company that acquires and holds only participating interests;

  • the umbrella organization of sports associations, insofar as it concerns general representation of interests against an annual fee;

  • a political party with only contributions as revenues;

  • a foundation that organizes a one-off public evening.


An entrepreneur is, for example:


  • the professor who regularly lectures, publishes and gives advice;

  • someone who performs a number of board positions / advisory / supervisory directorships, which take the necessary time;

  • the person who takes care of some accounting in the evenings;

  • the institution that periodically (for example annually) organizes an event (exhibitions, competitions, competitions, etc.);

  • the person who regularly takes part in bids at auctions and receives ironing money for this;

  • those who make investments that do not stand a chance without a chance, even if they do not actually conduct their business;

  • the person who provides advertising brochures and magazines for five clients and works with his own 'runners';

  • a horse breeder who focuses on breeding horses and selling them;

  • the person who operates a monitored parking lot;

  • a student association that operates a club that is only accessible to members;

  • the one who conducts a number of choirs;

  • an association that gives members the opportunity to play a card game;

  • a franchisee who purchases from a franchise organization and operates a store without an income guarantee;

  • a foundation that organizes chamber music concerts for a fee.

Independence


Finally, it is necessary that the company or profession is conducted independently. First of all, this means that activities in employment are not performed as an entrepreneur. After all, there should be no relationship of authority. Having to comply with the instructions of the client does not in itself stand in the way of independence. The following circumstances are important for the question of whether there is independence (outside the employment relationship):


  • the nature of the work;

  • the circumstances under which the work is performed;

  • the number of clients;

  • whether or not to have your own staff;

  • the obligation to perform the work personally;

  • the sickness and leave scheme;

  • freedom of working hours;

  • the financial risk;

  • liability for damage;

  • the supervision exercised;

  • the use of own company resources.


On the basis of these criteria, for example, in general no entrepreneur is:


  • newspaper deliverers;

  • branch and depot holders;

  • intermediaries at so-called house parties;

  • an employee who transports employees to and from work for the employer;

  • a homeworker who assembles substances according to a prescribed model;

  • a secretary who works for one client.


A commercial agent who was allowed to sell items within his own relationship network under an agency agreement, who had to grant discounts and was obliged to spend 2% of the commission on promotional activities, was considered self-employed, partly because the costs were for his own account, there was a car purchased and the risk of incapacity for work was run.


A partner who rents a property belonging to him to the partnership of which he is a part also acts as an independent entrepreneur.

Start your VAT Administration

 

Once your Dutch VAT number is activated, which you can check here, you are required to keep your VAT administration in good order. There are several ways to do this. Depending on the size of your (Dutch) company, and the volume of transactions, it can be considered to use an accounting tool, or to keep a simple overview in Excel.


In many cases, a newly registered company in The Netherlands will have to file its first VAT return after the end of the quarter (based on the calendar year). This means your company has only been active for a short period of that quarter, and the first VAT return must be filed via a hardcopy return. After that, the company will have to report full quarters, and it can file these VAT returns via an online portal. Read more here. 

Reclaiming ‘input tax’ or paid VAT on purchase invoice

 

Input tax is Dutch VAT on goods and services that you purchased for your business. Input tax includes:


– VAT charged to you by other entrepreneurs

– VAT that you must pay, because the VAT has been reverse-charged to you


For example, under a reverse-charge mechanism referred to under question 2a, question 4a or 4b (see our tutorial: Filing your VAT Return in The Netherlands)  


Conditions for deduction of input tax


You must be able to provide evidence of the VAT you deduct as input tax, based on invoices that meet the statutory

requirements. These requirements can be found at belastingdienst.nl. You may only deduct the VAT that you paid on purchases of goods and services if you meet the following conditions:


– You use the goods and services for commercial purposes, i.e. for your business. You may not deduct the VAT on goods

and services that you only use for private purposes.

– You use the goods and services for activities that are subject to VAT. You are not allowed to deduct VAT as input tax if you use the goods and services for exempt business activities.


Please note!


Supplies of goods and services for which the VAT is reverse-charged to the customer or which are subject to the

0% rate also qualify as taxed business activities.


Mixed use


It is possible that you purchase goods or services that you:

– use for both business and private purposes

– use for both taxed and exempt business activities

These situations involve mixed use. Alternative rules apply here.


Taxed business and private use


Do you purchase goods that you use both for business (taxed) purposes and for private purposes? In that case, you can choose which part you deduct as input tax. Up-to-date information about this can be found at belastingdienst.nl.


Taxed and exempt business activities


If you supply both taxed and exempt goods and services, you may only deduct the VAT for your taxed business activities. You cannot deduct the VAT for exempt business activities. In that case, you must split the VAT into a deductible and a non-deductible portion. This split should be based on the proportional amounts of your taxed and exempt turnover.

If You can demonstrate that the actual use differs from this proportional split, you may also split the VAT based on the actual use for taxed and exempt business activities.


Which VAT cannot be deducted as input tax?


For certain business expenses the VAT may not be deducted as input tax.


You cannot deduct the VAT on certain business expenses. It concerns, for example, the following situations:


– private purchases

– expenses for exempt business activities

– purchases that you use for employee benefits, if the benefit for employees is more than € 227 per year

– VAT you have paid in other EU countries

Tax relief under the small businesses scheme


You are not allowed to use this scheme  if your business is not based in the Netherlands.


Total amount due or to be refunded The tax return program automatically calculates the amount you must pay or for which you request a refund.


If you have to pay VAT, you can read under ‘General information’ how to pay the tax. If you request a VAT refund,

we will pay the amount into the account number you stated for VAT refunds as soon as possible.

Can I avoid VAT on imported goods? (art. 23 license)

 

Dutch companies that import goods to the EU, should consider the advantages of the article 23 license, to avoid any VAT duties on import.


When importing goods to the Netherlands (EU)  a company must typically file an import declaration at the Dutch customs. Based on the value of the goods, the VAT must be paid immediately. Custom duties might also apply.


The VAT that is paid on import, can be declared at the very next VAT Return and can be charged back. This means that companies need to pay the VAT in advance, which will affect their liquidity.


To improve their liquidity, and avoid paying any VAT on import, Dutch companies can apply for the so-called Article 23 License.


This means that no VAT is due at customs in The Netherlands, instead, the VAT is declared in the next VAT return.


Foreign entrepreneurs can not apply for an article 23 license themselves, they will need to engage with a tax representative.

As we have mentioned above, non-resident companies can not apply for the license themselves therefore they need the help of a tax representative. This tax representative must fulfil the following requirements:


  • The tax representative must be established in the Netherlands;

  • The tax representative must provide financial security for VAT;


When a foreign entrepreneur has appointed a tax representative, the entrepreneur usually is not obliged to register itself, with the Dutch Tax Authorities, as a taxpayer for VAT, when no other business is conducted in the Netherlands.

These tax representatives can take care of the following:


  • Completing and filing the VAT return;

  • Completing and filing the intra-community transaction declaration;

  • Applying the reverse charge mechanism on import.

Reclaim paid VAT on unpaid invoices

 

If you have delivered a product or service, you send an invoice. Unfortunately, it is possible that a customer does not pay the invoice, or only partially. While you have already stated the VAT as received VAT with your quarterly declaration. You can reclaim this irrecoverable VAT if the customer has still not paid at the latest 1 year after the expiry of the payment deadline. Have you not set a payment term? Then the statutory payment term of 30 days after receipt of the invoice applies.


If you have submitted your first VAT return, and you are expecting a reclaim, there might be a delay in the payment by the Tax & Customs Authorities.


Within 8 weeks after they have received your VAT return, you should receive the money. However, in case of newly incorporated Dutch entities, which are managed by non-residents, and active in International Business, the Tax Department could send a letter with additional questions (creating an extra delay). In general, payments are done within 2-3 weeks after the VAT return is submitted.

Frequently asked Questions

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