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21 January 2019 Netherlands: Key considerations for final VAT return of 2018 This Alert summarizes the relevant Value Added Tax (VAT)-related issues that businesses may have to address and report in the last Dutch VAT return of their (financial) year. This Alert also reflects on certain relevant VAT-related events of the past year as well as key issues to consider for 2019. Businesses are allowed to deduct all VAT on costs relating to company cars. At the end of the financial year, they adjust this by repaying the deducted VAT relating to the private use of such cars by their employees and by themselves. The VAT payable is – in principle – calculated based on actual private use, i.e., mileage. For VAT purposes, commuting is considered private use. Businesses are allowed to use a fixed rate adjustment by paying 2.7% of the list price of the car (including VAT and Private Motor Vehicle and Motorcycle Tax). An adjustment of 1.5% applies from the fifth year following the year in which the car was first put into use. This lower adjustment rate may also be applied if no VAT was deducted on the purchase of the company car. Based on case law, businesses can also decide not to apply the above fixed rate adjustment, even if they do not have a complete trip administration (based on mileage). Generally speaking, employee benefits and gifts to business relations require a VAT adjustment only insofar as the amount spent per person per year exceeds €227, and only for the cases where this amount is exceeded. A special scheme applies for company restaurants. If the threshold is exceeded, the VAT on any of the goods and services supplied to that person during the year is not deductible (and may have to be adjusted). A different adjustment system applies to goods or services given away or applied for free by the entrepreneur himself or to people that would have been allowed a VAT deduction if they would have purchased the goods or services themselves. Also, there are different rules that apply to the private use of business-owned real estate. The rules for adjustment for private use are very complex and taxpayers should discuss with their local country VAT professional. When businesses purchase goods or services, they have to determine how much VAT they can deduct. If businesses use the goods or services only for VAT-taxed purposes, the full amount of VAT may be deducted. If goods or services are used only for exempted purposes the VAT may (as a main rule) not be deducted. If goods or services are used for both VAT-taxable and VAT-exempted purposes, the input tax may be deducted proportionately. Special rules apply to the deduction of VAT relating to the purchase of goods that are (normally) depreciated for corporate tax purposes. For immovable property, the initial VAT deduction is reconsidered for a period of nine financial years following the financial year in which the property was put into use; for movable property this is done for four years. During this period (the revision period), the initial deduction must be reconsidered at the end of each financial year. If the use in the past financial year leads to a different VAT deduction than the initial VAT deduction, an adjustment needs to be made. The relevant tax base for this adjustment is calculated by taking 10% (immovable property) or 20% (movable property) of the VAT originally paid by the business on the initial purchase. If in any financial year the calculated adjustment would lead to a smaller than 10% difference compared to the initial VAT deduction, no adjustment is required. The VAT on general expenses can be deducted based on the so-called ”pro rata” portion. The deductible portion is calculated by dividing the taxed turnover by the total (taxed and exempted) turnover. The particular pro rata for a financial year should be determined at the end of that year. It may also be possible to deduct VAT on general costs based on the ”actual use” of all general costs. The transfer and lease of immovable property is technically exempt from VAT. However, parties may opt to tax a transaction in both situations. This is only possible if the buyer or the lessee uses the immovable property for taxed supplies for at least 90% (70% for certain specific businesses). If parties opted to tax the transaction and the purchaser or lessee no longer meets the 90% requirement, he will have to notify the tax inspector of the seller or lessor in writing. Purchasers of an item of immovable property must declare they comply with this 90% requirement in the financial year when the property was supplied and the financial year subsequent to that. This should be done within four weeks after termination of this period. It is relevant for purchasers and lessees of immovable property to establish at the end of each year whether they still qualify for the 90% requirement. Adjustments to VAT returns filed for previous periods must be submitted (electronically) as an additional VAT return. If the aggregate adjustable VAT amount is less than €1,000 (receivable or payable), the adjustment may be included in the next regular VAT return. Additional VAT returns for the year 2018 resulting in VAT amounts payable should be submitted before 1 April 2019 to avoid interest. When an amount receivable will not be paid (in full), businesses can (partially) reclaim the remitted VAT. Entitlement to a (partial) VAT refund arises when it is established that a receivable will not be paid partially or in full, at the moment that this can be determined. Entitlement to a refund arises ultimately one year after the date on which the receivable has become due. The refund request is included in the regular VAT return. Note that if a receivable that has been marked as ”bad debt” is (partially) paid after the overpaid VAT has been refunded, the business will have to repay (part of) the refunded VAT. These rules apply to the opposite situations as well. If VAT has been deducted on a payable amount that is not (fully) paid, the business will have to repay that VAT a year after the amount became payable at the latest. If the business decides to pay at a later stage, the relevant VAT amount can be deducted again. This can also be done in a regular VAT return. If receivables are transferred, the right to claim VAT bad debt relief is also transferred to the transferee. For supplies to customers in other EU Member States that do not have a VAT identification number (e.g., private individuals), a special regime applies in cases where the goods are transported by or on behalf of the supplier to the EU Member State of the customer (so-called ”distance selling”). This mainly concerns sales to private individuals, but also, for example, to farmers and legal entities-non-entrepreneurs. In principle, these deliveries are subject to Dutch VAT. This is different when the fees for supplies to the other EU Member State exceed the threshold amount in the relevant year or in the previous year. This amount differs per EU Member State. If the threshold amount is exceeded, all deliveries in that year and the following year to customers in the relevant EU Member State are taxed in that EU Member State. The supplier must register in that Member State and pay the VAT there in local VAT returns. The supplier must consider per country whether the relevant thresholds for these sales was exceeded. From 1 January 2019, the reduced VAT rate will be 9%. Businesses do not have to remit an additional 3% on payments received in 2018 (and where 6% VAT was remitted to the Dutch Tax Authorities) for supplies that will be made in 2019. Note that transactions that have taken place in 2018 and that were subject to the lower VAT rate of 6%, should also be adjusted applying the 6% VAT rate, even if the adjustment takes place in 2019 (e.g., by granting a volume discount or because goods are returned). From 1 January 2019, new VAT rules apply to transactions involving vouchers. The rules only apply to vouchers issued after 31 December 2018. The new rules do not apply to discount vouchers. Under the new rules, a difference is made between the VAT treatment of transactions involving ”Single Purpose Vouchers” (SPVs) and ”Multi-Purpose Vouchers” (MPVs). Issuing an SPV is considered a taxable event, subject to the VAT rate of the ”underlying” transaction at the time of issuing or selling the SPV. Where goods or services are supplied against redemption of an MPV, VAT is only due at the time of the transaction for which the MPV is redeemed. Businesses that do not issue SPVs themselves, but that accept SPVs, may have to issue two invoices if a supply is made where the customer redeems an SPV and pays another part of the price in cash: one invoice issued for the supply against the cash payment (issued to the person making that payment) and another invoice issued to the business that will compensate (pay) them for accepting the voucher (usually the issuer of the voucher or the business running the voucher scheme). The VAT regime applicable to electronically supplied services, telecoms services and broadcasting services supplied to non-business customers will be simplified from 1 January 2019. From that date, businesses performing these services are allowed to charge the VAT from their country of establishment where the turnover generated by performing these services to foreign customers does not exceed €10,000. Also, businesses established outside the EU that have a VAT registration number in the EU will be able to apply the Mini One Stop Shop or MOSS-system (this was not allowed prior to that date). The invoicing rules will be simplified as well: businesses using the MOSS-system can apply the VAT invoicing rules of their Member State of establishment. Finally, businesses whose turnover from supplying these services does not exceed €100,000 in the current or previous financial year, only need one piece of evidence that demonstrates where a customer is established, instead of two non-contradictory pieces of evidence. The application of the ”sports exemption” will be extended from 1 January 2019. Most activities related to sport or physical education will be VAT exempt (in line with the EU VAT rules). Besides membership fees, running sports facilities (e.g., football pitches, club houses, etc.) by non-profit-making organizations are VAT exempt. This means that the VAT on costs with regard to these facilities can no longer be deducted, making it a(n additional) cost. All organizations that are engaged in services closely linked to sport or physical education are covered by this VAT exemption, as long as they are non-profit-making. Until 1 January 2019, the exemption only applied to, for example, clubs or associations. From 1 January 2019, supplies involving seagoing vessels are no longer VAT exempt by default. The application of the 0% VAT rate (‘exemption’) only applies to transactions involving vessels that are used for at least 70% on the high seas (where ‘high seas’ is defined as ‘outside the territorial sea or the ‘12 nautical miles zone’). Other transactions involving vessels are subject to the standard VAT rate of 21% or the lower VAT rate of 9%. The specific VAT rules for SMEs will be adjusted from 1 January 2020. Anticipating this change, SMEs can inform the Dutch Tax Authorities from 1 June 2019 that they wish to apply these new rules. Any business established in the Netherlands that expects its turnover (generated in the Netherlands) not to exceed €20,000, can apply a ”VAT exemption” from 1 January 2020. This new scheme is less complex than the current SME scheme (kleineondernemerssregeling) and will also apply to corporations, associations, limited liability companies (BVs), among others. The new SME scheme only applies to the supply of goods and services in the Netherlands. From 29 March 2019, the United Kingdom (UK) is no longer part of the EU, irrespective of whether transitional or agreements are concluded between the EU and the UK. At the time of this Alert, no agreement has been reached between the EU and the UK on a possible transitional period during which certain cross-border transactions between the EU and the UK will (continue to be) treated as intra-EU transactions until the end of the proposed transitional period. Moreover, a ”hard Brexit” is also still a realistic outcome. It is crucial for businesses to be prepared for the impact of the Brexit, not only from a VAT perspective. On 4 October 2017, the European Commission published its proposals for transforming the current EU VAT rules with regard to cross-border supplies of goods to a definitive system. In the run-up towards this definitive system, the Commission introduced a number of temporary ”quick fixes”: one for ”call off stock,” one for chain transactions, one for demonstrating the application of the VAT exemption or zero rate to the intra-Community supply of goods and one new requirement for the application of that exemption. In the original proposal, these approaches would apply from 1 January 2019 and could only apply to transactions involving ”Certified Taxable Persons” or CTPs. In the latest proposal, businesses no longer need CTP-status for applying the temporary approaches and the quick fixes will only apply from 1 January 2020. Foreign EU VAT can be reclaimed via a portal at the website of the Dutch Tax Authorities. Foreign EU VAT attributable to 2018 can be reclaimed until 30 September 2019. Different rules and conditions may apply to the recovery of non-EU VAT. For more information about VAT refunds, see EY Indirect Tax publication, Managing indirect tax refunds. Ernst & Young Belastingadviseurs LLP, Amsterdam
Ernst & Young Belastingadviseurs LLP, Rotterdam
Ernst & Young Belastingadviseurs LLP, Eindhoven
Ernst & Young Belastingadviseurs LLP, Arnhem
Document ID: 2019-5090 |
