Changes to Dutch VAT legislation

4 December 2017

The Netherlands has introduced the following reforms to its VAT policies.

  • Tightening criteria reduced VAT rate (6%) for medicines.

From 1 January only medicines for which a marketing license has been granted under the Dutch Medicines Act will be taxed at 6% VAT.

  • Introduction of joint and several liability of the pledgee, executor and mortgagee for VAT debts.

A pledgee, mortgagee or executor is liable for the VAT due for the delivery of a property if he (pledgee -mortgagee – executant) knew (or should have known) that the VAT was not or not fully paid and will not or will not be paid in full.

  • Abolition of the special VAT agriculture regime.

The supply of typical agricultural products (arable products, animals and floricultural products) and services (including soil tillage and keeping and fattening of animals, etc.) by farmers will be subject to VAT from January 1 2018. Farmers applying the VAT agriculture regime on 31 December 2017 may adjust the not-deducted VAT on investments at once for the remaining revision period in one of the tax periods of 2018.

From 1 January 2018 several services to farmers and foresters (including but not limited to breeding services, inspection and research related to artificial insemination and embryo transplantation as well as services provided by accounting and tax consultancy firms) will be subject to 21% VAT.

Changes foreseen for 2019

  • Tightening criteria VAT zero-rate for shipping supplies.

The European Commission has expressed concern at the Netherlands’ wide application of the zero VAT rate for shipping.

From the 1st of January 2019, the zero rate may only be applied if a seagoing vessel spends more than 70% of its time on the high seas (outside the 12 mile zone).

  • Intention to increase of the reduced VAT rate from 6% to 9%.

The Dutch government is aiming to shift from direct taxes to indirect taxes. With the additional VAT revenues, tax reductions in income tax and corporation tax can be realised with effect from 2019. A reduction in direct taxes is beneficial for the competitive position of businesses. A higher VAT rate does not lead to higher costs of Dutch exports as the ‘export’ of goods and services because of the zero rate and the place of service rules is not taxed with Dutch VAT.

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