VAT IN THE NETHERLANDS
The Netherlands uses a value-added tax system (VAT), which is named Belasting toegevoegde waarde (BTW) in Dutch. This system is very similar to the system that is used in other countries of the European Union. Not all transactions are subject to VAT, but in Holland, it is very common to charge this value-added tax. The regular tax rate is 21%, and this rate is charged on (almost) all goods and services by businesses within Holland.
If products are imported from outside the EU, this VAT rate may also apply. The Netherlands also uses a special lower tax rate. This rate was 6% for many years, and it applies to specific goods and services, for instance, food products, medicine, art, antiques, books, entry to museums, zoos, theaters, and sports. This rate has been increased to 9% as of 2019.
The value-added tax (VAT) is a broadly based consumption tax that all EU countries use, including the Netherlands. As a consumption tax, the burden of paying it is placed on the final consumer of the goods or services. While all EU countries apply a VAT tax, each member country can make decisions about what to tax and on what rate levels. VAT in the Netherlands is considered an indirect tax because it is first paid to the seller of the goods or services. The seller then pays the tax to the revenue authorities.
More information about the Dutch VAT rate
The value-added tax rate in the Netherlands is rather straightforward. However, there are some exceptions that can make it harder to understand every little detail. If you want to be sure you are doing everything right, it would be best to hire a consultant who can guide you through the process. Intercompany Solutions for example. We can help to set up your business in the Netherlands. We provide corporate solutions for investors and companies worldwide, and serve international clients who are interested in company formations and corporate services. We help entrepreneurs with all aspects of their company setup. Read more on setting up a business in the Netherlands.
The different VAT rates in the Netherlands
The Netherlands has several VAT rates and a list of goods and services that are VAT-exempt. The main, general Dutch VAT rate is 21% and this has been so since 2012. This rate applies to most goods and services.
There is a special VAT rate of 9% that applies to a subsection of goods that are considered necessities. The goods include foods and drinks (but not alcohol), livestock meant for agricultural purposes, medical necessities (such as prescription medications), most reading materials, and seeds for use in agriculture and horticulture. Materials purchased for home renovations are also sometimes taxed at this rate, depending on the age of the home. There are a few services that are taxed at this lower 6% rate, as well. Among these are hairdressing services, vacation rental homes, public performances that are considered artistic (plays and musical performances), and most transportation services.
A zero VAT rate is applied to items that are not consumed in the Netherlands. If they are shipped to and consumed outside the EU, then no VAT will be applied. Likewise, if the goods are purchased by a legal business entity within another EU country, then that entity is responsible for charging VAT to the final consumer in the country in which it exists. However, if the goods are sent to a final consumer in another EU country, then you must charge VAT in the Netherlands.
VAT exemptions in the Netherlands
The Netherlands also has a number of exemptions; visible exports are amongst these. These are zero-rated. If VAT exemptions apply, you don’t have to pay the tax, and you also cannot deduct it. There is a list of services that are completely exempt from VAT in the Netherlands. By being exempt, the state does not charge any tax on them whatsoever. These exemptions include medical services provided by a doctor or nurse, banking services, insurance advice and services, childcare services, and educational services.
Journalistic services are also VAT exempt, but only if the service provided by the journalist is deemed to be intellectual property and is only that journalist’s original ideas. Determining what is and what is not VAT exempt can be tricky, and it is suggested that you always speak with a local advisor to ascertain your particular VAT status. It is not possible to claim a refund of the VAT that is charged over the costs and investments that are related to the goods and services that fall under the VAT exemptions. Goods and services that are exempted from VAT are: letting or selling immovable property (provided that the building is more than 2 years old), healthcare services, childcare, care services and home care and other similar topics.
Are there any other tax exemptions in the Netherlands?
These aren’t the only tax exemptions in the Netherlands. Other tax exemptions are sports organizations and sports clubs, services supplied by socio-cultural institutions, financial services and insurances, services supplied by composers, writers, and journalists, education, and fundraising activities. There is also an agricultural scheme in place, which applies to agricultural and livestock farmers, foresters, and market gardeners. All the goods and services that are provided by these entrepreneurs are also exempted from VAT. This scheme is called ‘Landbouwregeling’. All other tax exemptions in Holland can be requested from the Dutch tax office.
A topic that needs some special attention is tax-free shopping. If you want to offer goods to customers who desire to shop tax-free, then you will need to take some extra measures and precautions. For example, you will need to check their ID or passport to make sure that these customers live outside the EU. Another requirement is that the goods you sell will leave the EU with the customer. In cases that you do charge VAT, you can return in to the customer at a later stage. You can achieve this by supplying your customer with an invoice, that also mentions the customer’s ID number. They will need to have this document signed by customs for export. Once the invoice is signed, they can send it back to you and you can refund the VAT they paid.
VAT rate for foreign entrepreneurs
If you are doing business in the Netherlands, but your business is established outside the Netherlands, then you will have to deal with the Dutch regulations. If the service or product you provide is supplied in the Netherlands, you usually have to pay value added tax here. However, in reality, the tax is often reverse-charged to the person who receives the service or product. If this is not a possibility, you have to pay the value added tax in the Netherlands. Reverse-charging VAT is possible if your client is an entrepreneur or a legal entity, established in the Netherlands. In that case, you can exclude the tax from your invoice and state ‘VAT reverse-charged’. You are allowed to deduct the tax charged over any costs related to this transaction.
VAT registration in the Netherlands
If your company provides any goods and services for consumption in the Netherlands or the EU, then it must register for VAT. Once you are registered, you are required to submit annual VAT returns and make regular payments to the revenue service of VAT you have received. These VAT submissions can now be made electronically. Payments can be made either monthly or quarterly. Some smaller companies that collect very little VAT may be able to make one annual VAT return and payment, instead of paying regularly throughout the year. You should consult with an advisor to determine if your VAT payments are low enough to qualify for a single, yearly payment.
Please contact our Dutch advisor for further details about VAT issues in the Netherlands. We can advise you on tax exemptions, and what you must do to qualify for them. We can also assist you with the submission of annual tax returns and help you register your company for VAT in the Netherlands.