Many entrepreneurs think that VAT is a burden on their business. This is a misconception and, of course, a false one. We will endeavour to explain why.
What is actually VAT, the Value-Added Tax (BTW in Dutch, Belasting over de Toegevoegde Waarde)?
It is an INDIRECT tax on consumption collected by companies and remitted to the tax authorities.
Be careful, it is neither an outley nor acquired!
Applicable VAT rates
In The Netherlands, there are 3 different VAT rates to consider:
A rate at 21%, a rate at 9% and a rate at 0%.
In some cases, it is possible to be exempt from VAT either by profession or by KOR status.
- The rate of 21% generally applies to all products and services of everyday consumption such as electronics, bicycles, household appliances, the services of a plumber for example, alcohol, etc.
- The 9% rate applies to all essential products and services such as food, beverages (non-alcoholic), art, sport, theatre, hairdresser, etc.
- The 0% rate is used for import and export. This rule only applies if you have your customer’s VAT number abroad. In that case, you can charge a 0% rate. On the other hand, if your client is established outside the Netherlands as a private person, the Dutch VAT rules must apply.
Just as important to know where VAT does not apply is health…
Some important VAT rules to know
On your invoices, you must mention:
- VAT rate applied
legal text KOR,
- EU/OUTSIDE EU or if exempt
- If your client is an individual or a company
- VAT is due at the time of billing
Let us now dive into the difference between the collected VAT and the deductible VAT.
The Collected VAT corresponds to the invoices sent to your customers including the corresponding VAT.
The deductible VAT is the VAT you pay on your business purchases and that can be deducted from your expenses.
- only if you also charge VAT on your products or services
- not derived from food and beverages consumed
- for some corporate gifts
The non-deductible VAT corresponds to the foreign VAT on your expenses which cannot be deducted from the Dutch VAT collected.
Wise to know:
- EU-EU charges must be recorded
- EU VAT can be claimed under certain conditions
A VAT declaration needs to be done:
- Per year
- Even if you are VAT free
VAT is a complex subject that needs to be understood and mastered in broad strokes in order not to run any risk of recovery (fine) by the tax authorities.
At De BoekhoudHoek, we help you with your reporting procedures and answer your questions whether they are simple or technical. We are here for you!
Need more advice? Just click here!