Holland has long been attractive for entrepreneurs looking to establish a business due to numerous social, cultural and geographical factors. Its comparatively favorable tax climate is also an important prerequisite in the process of decision-making.
Value Added Tax (VAT)
Value Added Tax has a great influence on corporate cash flows. Generally, a business can request a VAT refund for the amount it has incurred. Still, it may take several months until the tax is recovered through the periodical return. The period for foreign VAT reclamation may even be longer than a year and its duration depends on the EU member involved with the application for refund.
Negative influence of VAT on cash flows is also observed in the process of import of products in the European Union. Importers are obliged to pay VAT that can be reclaimed only retroactively, in the VAT return, or in a time-consuming process requiring a separate refund application. As a consequence, companies have to prepay the VAT on their imports with adverse effects on their cash flows. On this background, few member states of the EU have adopted schemes for deferral of VAT payments that would otherwise be due at the time of import.
Article 23 license
Companies established in Holland have the option to apply for the Article 23 VAT deferral license. This document makes it possible to postpone the import VAT payment until the submission of the periodical return. In the statement, the VAT can be included as payable, but at the same time, its amount is also deducted under input VAT. This means that businesses do not necessarily have to pre-finance VAT. Without Art. 23 license, the VAT due for import would become immediately payable at the country’s border. Its subsequent reclamation occurs either through the periodical return or through a lengthy process for refund requiring a special application. As mentioned above, the refund of this VAT may take months, even years, depending on the case. VAT deferral licenses are granted to companies registered in Holland and international businesses without local establishment that have assigned a Dutch fiscal representative (a tax service provider holding a general licence) for the purpose of VAT.
In most members of the EU, the VAT payable at import has to be transferred to the customs and tax administration at the time of importation or shortly after. Countries like Ireland, Germany, Italy, Great Britain, Spain and Sweden do not offer options for postponed accounting. In other countries, the payment of VAT can be deferred, but only in specific cases and under strict conditions. The only country that provides an option comparable to the Dutch deferral license is Belgium. There the transfer of due VAT can be postponed until the submission of the periodical VAT return.
The EU Directive on the common system of value added tax provides the option to grant an exemption from VAT on import goods destined for another member state straight after import. Import goods intended for storage or sale in the respective member state cannot be exempt from import VAT. However, there is a possibility to suspend the payment of VAT and duties due at the time of import for a particular time period.
When goods enter the territory of the EU, companies the option to store them in the so-called customs warehouses. Such warehousing is possible in all member states, although the formal procedure varies depending on the state. In this case, the payment of duties and VAT is deferred until the goods’ removal from the customs warehouse. Thus VAT and duty payments are temporarily suspended to the advantage of cash flow. At some point in time, these taxes become payable. On the other hand, if the goods’ next destination is unknown, their storage in a customs warehouse can be beneficial. For example, if the goods are subsequently shipped to third countries, no VAT and customs duties become due.
Why should you choose the Netherlands as your gateway to Europe
Considering the above, one can conclude that logistic and geographical factors are just some of the significant reasons to import goods through Holland. The option to avoid VAT pre-financing can be decisive for companies in planning the routes of their import goods.
There is also another factor that must not be overlooked: the level of responsiveness of the different customs and tax administrations across the European Union. Some adopt a strictly formal approach, while others welcome dialogue. The customs and tax administration in Holland is open to discussions. It is acknowledged for its high quality of service and proactive approach. The officers are also ready to confirm particular arrangements in written form, guaranteeing certainty (in advance) to taxable entities. The responsiveness of the Dutch administration is a valuable quality and a strong motivator, along with the favourable VAT arrangements at import, for businesses to choose Holland as a European gateway.
Are you interested? Our company has the network, local competencies, and experience to assist you in the efficient structuring of your import/export operations, both in Holland and abroad. We are here to consider your needs and meet them. If you would like to receive more information on the possibilities, please, do not hesitate to get in touch with us.