Across the whole of Europe, the VAT is harmonized. Yet individual countries have their own discretion and ways to implement these EU rules into local legislation. In other words, each EU country uses the same methodology, however the rates may differ for example. Eventually, within Europe the VAT is for the account of the ultimate consumer, the individual or the VAT exempt entrepreneur.
Each entrepreneur will principally need to declare VAT and must file a corresponding VAT return in the respective EU countries he is economically active in. He should declares amongst others the VAT he was obliged to charge his customers. Most important basic rule is that if you are a tax subject for VAT purposed indeed, you can request the VAT you paid on your purchases back from the Dutch Tax Authorities (“DTA”).
Rates and returns
Currently there is a standard rate of 21% and a lower rate of 9% in the Netherlands. Also a rate of 0% exists for example for export (outside EU). Do note that if you are in the e-commerce business the rules and rates may differ. Reach out to us if so.
VAT returns need to be filed periodically. Most entrepreneurs declare their VAT balances each quarter. If you have just landed and started in the Netherlands, you may expect that you have to declare your first VAT return on paper (non-digital). The DTA will follow up with a VAT assessment, stating the amount you have to pay and when you have to pay.
Deadlines for VAT payments and filings are strict. Filing too late will always result in a penalty. Therefore it is crucial that you are up-to-date with your bookkeeping and (tax) administration.
Want a VAT refund? Comply with all invoice requirements. Once in a while the DTA may perform an audit or a sample survey. It is essential that your invoices meet all requirements. This means that your invoices must at least have:
- invoice date;
- invoice number (numbered in a logical order);
- name and address of the recipient;
- description of the services;
- the VAT rate applicable (or if the VAT is reversed);
- the total amounts;
- your VAT number (and sometimes your client’s ID);
- the number from the Commercial Register (“Kamer van Koophandel” or Chamber of Commerce).
Want to improve your cashflow?
If you have a business where cash flow is crucial you may be dependent to the VAT refund, or at least it affects your bank balances. If so, consider filing a monthly return instead of a quarterly or yearly return. It may be an easy tweak.
Additionally, should you are shipping goods to the Netherlands on a regular basis (import business) we can apply for a so-called article 23 license on your behalf. Basically this license allows you to improve your cashflow as well, the VAT declaration will be delayed and as such you can deduct the VAT directly in the same tax return (which is often on a later moment than the moment of import). Reach out to us if you need any assistance.