What You Always Wanted To Know About Value Added Tax (VAT)

You must pay VAT or Value Added Tax when purchasing goods and/or services. It is the responsibility of the end-user of a product or service.

Who is VAT Liable?

As a main rule, activities which constitute a business are VAT liable unless they are exempt.

An exemption applies to businesses providing medical, cultural, educational, and financial services. Upon request, small businesses can also apply for a VAT exemption as long as their revenue is a max. of € 20.000 per year. Not charging VAT lowers the price for customers but a VAT exempted business cannot deduct it. A VAT liable business providing a VAT exempt service cannot deduct VAT related to the exempt service.

What Are the Applicable VAT Rates?

Most products and services if not exempted will use a rate of 21%. The 9% rate applies to food and beverages (except for alcohol), books, art, and medicine. The 0% rate for example applies to sales of goods and services to clients outside the EU.

VAT Deductions

For businesses VAT liable, any amount charged on business-related purchases is deductible in the return.

VAT Filings

VAT returns need to be filed and paid in the month after the quarter has ended. The filing months are April (Q1), July (Q2), October (Q3), and January (Q4). A VAT return needs to be filed even if income and costs are nil. Not filing a return will result in a penalty and an estimation of VAT income. There will be subsequent taxation of the estimated income by the authorities.

ICP returns need to be filed if you invoice businesses within the EU. The ICP return includes the amount invoiced and the VAT number of the EU business client.

VAT in an EU and International Situation

As Value Added Tax has been harmonized i.e. same law applies within the EU, special rules apply when invoicing EU customers. All invoices must contain the following information (irrespective of local or EU/Non-EU clients):

• Business address
• Customer address
• Date
• Reference number (in sequence)
• Amount charged
• Applicable VAT rate
• Type of good(s) or service(s)
• The total amount including VAT, KvK number, and VAT number

If an EU business client is invoiced the invoice must state: VAT reverse charged (see below). If goods are delivered to other EU member states other specifics apply.

Invoicing Dutch Clients

When invoicing non-business clients whether private of business, the invoices must state the applicable Dutch VAT rate. The VAT rate depends on the service or goods delivered.

Invoicing EU Clients

When invoicing business clients located within the EU, the invoices must state the VAT number of the EU-client. You must also list “VAT reverse charged” on the invoice. Under the EU VAT directive, a customer will apply the local VAT rate on the invoice received. The customer will file a local VAT return. When the client is VAT exempt the invoice should state 0% VAT not “VAT reverse charged”. Extensive exceptions apply for certain goods and services. Thus, it is important to check if the good or service is taxable in The Netherlands or in the other EU- Member State. ExpatTaxes is able to help you answer these questions.

Invoicing International Non-EU Clients

When invoicing international Non- EU clients, the applicable VAT rate should be 0% for goods and services.

VAT On Purchased Goods and Services

If the business is VAT liable, the Value Added Tax on Dutch purchasing invoices is tax-deductible. If the business provides activities which are VAT exempt, no deduction of VAT is possible. Please note only VAT on invoices related to business purchases is deductible. VAT related to food and beverages for business purposes is not tax-deductible. Foreign VAT is not deductible when filing a Dutch VAT return. It classifies as business costs unless the foreign VAT is refunded upon request. To request to refund foreign (EU) VAT, file online with the Dutch authorities. A request may be made if satisfying certain conditions and minimum amounts.

VAT on Sales via Internet

Specific rules apply for sales via internet. If a business sells goods via internet to private individuals within the EU, the VAT rate of the EU-state of the client applies provided the total annual sales within the EU are above € 10.000 per year. Specific other conditions apply depending on the type of business.