What does Dutch BTW (VAT) mean for your business?
If you are a foreign company with a Dutch office or subsidiary, this entails you also fall under the Dutch VAT regulations. The Dutch word for VAT is BTW; meaning the turnover tax you charge to your clients. All Dutch companies have unique VAT identification numbers, which changed for sole proprietorships on the 1st of January in 2020. If you do business in the European Union, you need to pay and charge VAT for nearly all services and goods, apart from a strict list of exemptions.
In this article we will provide you with a basic overview of Dutch VAT. For example the current rates, which services and goods fall under these rates and a list of exemptions. Please also keep in mind, that from July 1, 2021, new VAT rules for e-commerce will apply. So if you are thinking about starting a Dutch e-commerce company, you can find more information about these new rules here. You can also find some interesting information about starting an e-commerce business in the Netherlands in this article.
The Dutch VAT rates
In the Netherlands there are three distinguishable VAT rates: 0%, 9% and 21%. The highest rate of 21% is basically the standard rate for all products and services, which is why this is considered the general VAT rate. The 9% rate applies to certain products and also services. Amongst others these are food products, books, artistic works and medicines. You can find an extensive list below. The 0% VAT rate applies when your Dutch based company does business with companies based in other countries.
The three VAT tariffs explained
The 21% tariff is in essence the most commonly used tariff in the Netherlands. Most services and products fall under this category, unless there are reasons for exemptions. Another reason why a product or service might have a different tariff, is the reverse-charge mechanism when doing business with companies and people in other EU Member States. If none of these exemptions apply and your product or service does not fall under the 9% or 0% category, you always pay and/or charge 21% VAT.
The 9% tariff is also named the low tariff. This tariff applies to a wide variety of goods and services that are used daily or on a regular basis, such as:
- repairing bicycles
- repairing shoes and leather goods
- repairing clothing and household linen
- hairdressing services
- work on dwellings
- offering camp parking
- offering accommodation
- granting access to cultural and recreational events and facilities
- performance by performers
- opportunity for sports and bathing, including swimming pools and saunas
- passenger transport
- supplying or lending e-books
The 9% rate only applies if the eBook is similar to the physical edition to which the 9% rate applies.
- granting access to news websites (such as newspapers, weekly newspapers and magazines)
The 9% rate does not apply if this news website consists mainly of advertising, video content or listenable music; in that case the 21% rate applies.
The 9% rate also applies to a number of services closely linked to goods covered by the 9% rate:
- yielding goods, such as cultivation of plants and breeding of animals
- selling food in the hospitality industry
- renting, repairing, maintaining, adapting, fitting and preparing (medical) devices
- lending books and periodicals
- lending or renting out works of art by the artist himself
The 21% rate includes the lending or rental of works of art by others, such as art lending institutions.
The 0% tariff applies to all company owners and entrepreneurs, who do business with foreign countries. It doesn’t matter whether the company owner is a foreigner or not; if the business is executed from an established branch office in the Netherlands, all its activities fall under the Dutch tax regulations. The 0% tariff mostly applies to the supply and shipping of goods from the Netherlands to other EU countries, but can also apply to certain services that are provided from the Netherlands.
These can also be services that are related to cross-border transactions, for example transportation of goods internationally or work on goods that will be exported. This tariff also applies to all international transport of travelers and passengers. An interesting note: if you apply the 0% VAT tariff, you still have the right to deduct VAT on your quarterly statement to the Dutch Tax Authorities.
Exemption from VAT: how does this work?
Next to the three distinct VAT rates, there are also certain businesses and business activities as well as sectors that are completely exempt from VAT. This means (in simple terms) that the customers of such companies and organizations do not have to pay any VAT. These businesses, activities and sectors are as follows:
- investment gold
- collective advocacy
- composers, writers, cartoonists and journalists
- financial services and insurance
- fundraising activities
- health care
- youth work
- supply of movable assets
- lectures, excursions and guided tours
- real estate
- postal services
- radio and television
- partnerships (umbrella exemption)
- sociocultural institutions
- sports organizations and sports clubs
- funeral directors
This comprehensive list can also be found on the website of the Dutch Tax Authorities.
More special exemptions
Next to the standard exemptions mentioned above, there are also a number of extra exemptions which lead to a 0% VAT rate. The most relevant are all mentioned below. If you have a business idea in any of these sectors, chances are high you don’t have to charge VAT to your customers and clients.
The healthcare sector
All medical professions and consultations that solely focus on healthcare are exempted from VAT. This exemption applies to all professions that can be categorized under the Health Care Professions Act (BIG). So this exemption applies to professions such as paramedics, therapists, doctors, surgeons, general practitioners, care homes, orthodontists and dentists.
However, please keep in mind that the exemption only applies if the services offered are within the area of expertise of the professional. So a dentist cannot use the 0% rate if he or she, for example, offers psychology sessions without the proper academic degree and professional experience. This rule also stretches to third parties, as temping agencies that provide health care professionals have to charge the regular rate of 21%. The latter also applies to personnel registered in the BIG register.
Digital and online services
If you own a company that supplies digital services such as telecommunications and broadcasting, or online e-services, then the place from where you supply these determines which VAT rate applies and where it needs to be paid:
- If it’s a Dutch customer, the appropriate VAT rate applies.
- If your customer is a company in an EU member country, then your customer will pay VAT in their own country, and you charge 0% VAT.
- If your customer is a consumer living in an EU member country, then you will be charged VAT in accordance with the regulations in the country of the consumer
- If you have a customer in a country outside the EU, you do not pay or charge VAT
You might know this situation from various national and international airports: tax-free shopping. This situation applies, when you sell goods to non-EU residents: in that case you do not charge VAT to your customers. In order to prove this on future declarations, you can use a copy of the sales invoice stating your customer’s credentials. A cheque with the customer’s name or a copy of his or her passport is also considered proof, in the case of the latter you will need to cover the citizen service number and the customer’s photo due to privacy legislation.
Some fund-raising activities are also exempt from VAT, this is the case if the activities are initiated for:
- Care organizations
- Youth organizations
- Educational organizations
- Collective interest organizations such as charities
- Sports organizations
- Social and cultural institutions
Keep in mind there is a limit to the exact amount you can raise for such organizations. If you exceed this limit, other VAT rates may apply.
If you consider working in the Netherlands as an independent teacher or for a private school, there might be a possibility your services are exempt from VAT. Your services need to be within the field of vocational training, and you also need to be registered in the Central Register of Short Professional Training Courses (Centraal Register Kort Beroepsonderwijs, CRKBO).
Most services that are offered by non-profit sports clubs and organizations are exempt from VAT too. The services need to be closely related to physical exercise and/or the actual practice of sports.
You can look on the website of the Dutch Tax Authorities for an extensive list of tax (VAT) exemptions.
Intercompany Solutions can help you with all financial matters
If you plan to establish a company in the Netherlands, you will have to go through a lot of paperwork and separate actions in order to realize this. Our experienced team can help you during this process, as we can handle the entire procedure in only a few business days. We are also always available to assist you with any financial questions and matters. Please contact us for more in-depth information about our services.