We bring here an article elaborating on the Dutch Value Added Tax, VAT or as it is locally named BTW in order to educate people about this tax, its calculation and usage.

The following text is extracted from the Dutch tax publications, however it is brought up here as general reference only and no one should rely on it as a substance to the law itself.

 

If you are an entrepreneur who is not based in the Netherlands (non-resident entrepreneur) and who supplies goods or services in the Netherlands, you will have to pay Dutch turnover tax in respect of these goods or services. Alternatively, you do not supply goods or services in the Netherlands but incur costs on which turnover tax was charged. In that case, you can reclaim this turnover tax.

 

Please note:

In the Netherlands, turnover tax is usually called VAT. Whenever the term VAT is used, this term refers to Dutch turnover tax.

 

The following issues are relevant:

 

•supplying services in the Netherlands •VAT and goods transactions •VAT and immovable property in the Netherlands •calculating VAT: rates and exemptions or reverse-charge •deducting and reclaiming VAT •representation •competent tax office and registration •VAT return •application for a VAT refund Please note:

 

The above mentioned  information is not meant for non-resident entrepreneurs with a permanent establishment in the Netherlands. If you have a permanent establishment in the Netherlands, the same rules apply that are applicable to Netherlands-based entrepreneurs (resident entrepreneurs).

 

What is a permanent establishment?

A permanent establishment is an industrial or commercial establishment located in the Netherlands that is equipped with sufficient manpower and other resources to operate as an independent business. The establishment is used for supplying goods and/or services to third parties. Examples of permanent establishments are:

 

•a shop or another fixed retail outlet;

•a workshop or a production plant with an adjoining office

A store, a warehouse or an office that is used only for certain ancillary or secondary activities (such as performing research, advertising or distributing information) is not regarded as constituting a permanent establishment. A rented holiday home is not considered to be a permanent establishment either.

 

Supplying services in the Netherlands

The term ‘services’ refers to all activities, other than the supply of goods, that are carried out on a commercial basis in return for remuneration. The following are examples of services:

•passenger and freight transport

•musical and theatrical performances

•the granting of licensing rights

•the activities performed by management consultants, lawyers and accountants

•activities relating to movable or immovable property

Whether you owe VAT when rendering these services depends on whether the service is rendered in the Netherlands. If it is, you will – in principle – have to pay Dutch VAT. However, if the VAT owed is levied from the buyer of the service, you will not owe any VAT.

 

Therefore, you will only owe VAT if the service is rendered in the Netherlands and if the VAT owed is not levied from the buyer of the service.

 

Service is rendered in the Netherlands

Services are liable for Dutch VAT only if they are performed in the Netherlands. There are special rules for deciding where a service is performed (known as the ‘point of supply’), and the same rules apply in all EU Member States. The basic rule is that services are provided at the place where the supplier is either resident or established. The following services, amongst others, are excepted from this rule:

 

•Services relating to immovable property are considered to be rendered at the place where the property is located.

•Services in the field of culture, art, sports, science, education, entertainment or similar areas are considered to be rendered at the place where the activities are actually performed.

•Consultancy services, advertising and employment services are considered to be rendered at the place where the customer is established, assuming that the latter is an entrepreneur.

•Intra-Community freight transport is considered to take place at the point where the journey commences. If the customer has a VAT identification number issued by a Member State other than the Netherlands, the point of supply is considered to be in the other Member State.

•The repair and processing of movable property is – as a rule – considered to take place at the point where the relevant activities are actually performed.

•The repair and processing of movable property for a customer who has been assigned a VAT identification number in a Member State other than that in which the activities are actually performed. is considered to take place in the Member State which assigned the VAT identification number to the customer. This is subject to the condition that, following the repair or processing, the goods are dispatched or transported outside the Member State where the services were rendered.

 

The VAT owed is levied from the buyer of the service

If you perform services in the Netherlands as a non-resident entrepreneur, you do not normally have to deal with VAT, because the levy of VAT is often transferred to the buyer of the service. This means that it is the buyer of the service rather than you, the provider of the service, who has to pay VAT. In the following situations, the buyer of the service owes the VAT:

 

•the buyer of the service is an entrepreneur who is based in the Netherlands or has a permanent establishment in the Netherlands; or

•the buyer of the service is a corporate body based in the Netherlands.

Please note:

 

If the VAT charge is transferred to your customer, you are not allowed to include any VAT in your invoice.

 

If you are a non-resident entrepreneur supplying services in the Netherlands, and you need to pay VAT yourself (for example, because your customer is a private individual), you should register with the Dutch Tax and Customs Administration. You should file a return in the Netherlands.

 

VAT Example 1

A firm of painters established in Belgium carries out painting work in a house in the Netherlands that belongs to a private individual. The painters are considered to render their services in the Netherlands. Because the customer is a private individual, VAT is not transferred to the customer. The Belgian firm of painters is liable for Dutch VAT: they must register with the Dutch tax authorities and file a VAT return in the Netherlands.

 

VAT Example 2

A British pop group performs at a concert held in the Netherlands and organized by a Dutch entrepreneur. The service is considered to have been performed in the Netherlands. Because the buyer of the service (the organizer of the concert) is an entrepreneur, the VAT is levied from the buyer.

 

Calculating VAT: rates and exemptions or reverse-charge

If you supply goods or render services in the Netherlands, you are not always required to charge VAT. If an exemption or reverse-charge mechanism applies, you do not have to charge VAT. The applicability of an exemption or a reverse-charge mechanism should be clear based on the invoice relating to the activity. If you have to charge VAT, one of three different VAT rates will apply.

 

What should you charge VAT on?

The price charged for a good or service often consists of a number of different elements. In the case of a taxable supply, the basis of taxation is the total sum that you charge your customer, i.e. including postage, travel expenses, telephone charges, packaging (excluding deposits on returnable bottles) and so forth.

 

Acquisition in the Netherlands from another EU country

In the event of a purchase made in the Netherlands of goods from another EU Member State, the VAT charge is based on the amount your supplier charges you. You should convert this figure into euros if it is not stated in euros, using the rate of exchange on the date on which the VAT charge arises.

 

VAT rates in the Netherlands

If a supply is not exempt and is not subject to the reverse-charge mechanism either, it is automatically taxed at one of three possible rates: the 0% rate, the 6% rate or the 19% rate.

 

VAT 0% rate

The 0% rate applies to entrepreneurs who do business outside the Netherlands. This usually involves the supply of goods to other countries. The sections entitled You are performing an intra-Community supply from the Netherlands and You are exporting goods from the Netherlands tell you in which cases you may apply the 0% rate. By applying the 0% rate you apply a kind of exemption, but are still entitled to deduction of input tax.

 

VAT 6% rate

The low rate of VAT is 6%. This rate applies, for example, to the supply, import or intra-Community acquisition of:

 

•food, drink (excluding alcoholic beverages) and the ingredients used in their production

•cattle, sheep, goats, pigs and horses

•medicines

•books, daily newspapers and magazines

•agricultural and horticultural seeds

•ornamental plants

 

The following services are also taxed at 6%:

•passenger transport;

•paintwork on dwellings that are over 15 years old

•hairdressing services

•bicycle repairs

•the letting of holiday homes

•performances by performing artists

•the granting of admission to:

- circuses

- travelling fairground attractions

- musical and theatrical performances

- sports events

VAT 19% rate

In all other cases, you should charge VAT at the basic 19% rate. In other words, the 19% rate applies to supplies that are not exempt, not subject to the reverse-charge mechanism, not zero-rated and not taxed at 6%.

 

Deducting and reclaiming VAT

If you buy goods or incur other costs in the Netherlands on behalf of your firm, your suppliers will charge you VAT. You will also need to pay VAT if you import goods into the Netherlands from non-EU countries, or if, acting from an establishment in the Netherlands, you purchase goods from another EU Member State. The VAT you are charged on your purchases and costs is known as ‘input tax’. You are entitled to deduct the input tax from the VAT you have to pay in the Netherlands. If the amount of input tax is larger than the amount of VAT you have to pay, you are entitled to a refund of the difference. Even if you do not supply any goods or services in the Netherlands, you are still entitled to recover the VAT. In this respect, the following issues are relevant:

 

VAT on an invoice

If you buy goods or services in the Netherlands, your supplier will charge you VAT. The first requirement, in order to deduct or recover this VAT, is the presence of a proper invoice. A proper VAT invoice should include the following information:

 

•the supplier’s name and address

•the supplier’s VAT identification number. The VAT identification number is the number under which an entrepreneur is registered with the Tax and Customs Administration. A Dutch VAT identification number always consists of a total of 14 figures and letters, starting with the country code NL applicable to the Netherlands. For example: NL001234567B01

•the customer’s name and address

•the invoice number: invoices should be numbered consecutively, where necessary in several sequences

•the invoice date

•date of the supply or the service

•the quantity and type of goods supplied

•the quantity and type of services rendered

•for each rate or exemption:

- the unit price exclusive of VAT

- any discounts if these are not included in the unit price

- the VAT rate applied

- the consideration

•in case of advance payment: the date of payment if this date is different from the invoice date

•the VAT amount

In some situations, the invoice should also show the customer’s VAT identification number. This will be the case if an entrepreneur supplies goods to entrepreneurs in another EU country and in respect of certain related services (including transport services).If a reverse-charge mechanism applies, the customer’s VAT identification number should also be stated in the invoice.

 

In addition, the invoice has to show whether a special VAT facility applies, i.e.:

 

•trade in used goods

•application of a reverse-charge mechanism

•application of a VAT exemption

•intra-Community supplies of goods

Petrol receipts

When supplying fuel for land vehicles, there is no need to include the customer’s name and address in the petrol receipt. In order to deduct the VAT concerned, you should comply with the condition that it should be possible to trace your name and address as a customer through the way payment is made. You can be traced as a customer when you make payments through your bank/giro account or by using a credit card or tank pass.

 

Food and drink in catering establishments and exemptions

When food and drink is supplied for immediate consumption in catering establishments, there is no need to issue an invoice. This also applies to entrepreneurs performing exempt activities: they do not have to issue an invoice in respect of that activity.

 

Public transport and taxis

There is no need to issue an invoice when persons travel by public transport or taxi.

 

Supplementary requirement for invoices under the agricultural scheme

Entrepreneurs in the agricultural industry are entitled to an exemption under a special scheme, under which they do not have to include VAT in their invoices. If you buy goods from an entrepreneur applying this exemption, you are still entitled to deduct 5.1% of the invoice amount as input tax. The supplier must, however, make clear on his invoice that he is entitled to this special exempti