Dutch Small Enterprises arrangement will change to exemption
4 May 2018
Entrepreneurs / natural persons or combinations of natural persons established in the Netherlands keeping adequate records and annually not paying more than € 1.883 VAT can apply the Dutch Small Enterprises arrangement, called KOR (Kleine ondernemers regeling). This arrangement contains a VAT-reduction scheme. In case € 1.345 VAT or less is due per year, even an exemption from administrative obligations can be requested. Unless this exemption is asked, the small entrepreneur applying the KOR is entitled to deduct VAT on costs and investments.
An internet consultation by the Dutch Ministry of Finance on the adjustment of the KOR scheme as of 1st January 2020 is in progress. However, this is what we know to date. The proposed new arrangement is named ‘turnover-related tax exemption scheme for VAT’ (‘omzet gerelateerde vrijstellingsregeling van omzetbelasting’ – OVOB). The proposed OVOB anticipates the proposal for a Council Directive amending the EU VAT Directive. Instead of the VAT amount annually payable, the volume of the annual turnover will be decisive. Unlike the KOR, the OVOB may also be applied by legal entities such as a B.V., N.V. and or a foundation.
Unlike the KOR the proposed OVOB is a real VAT exemption (without credit). In case of an annual turnover below a certain amount no VAT is due, if the entrepreneur opts for the OVOB. In this situation he cannot set off or reclaim VAT as input tax.
If an entrepreneur opts for the OVOB, no VAT is due in the case annual turnover is below a certain amount. This amount is not defined yet. The average amount for similar schemes in the EU Member States, excluding the UK is € 26.000. Small Enterprises
In principle, VAT deducted from investments during the past years must be revised when the OVOB is applied, that is 4 years after the year of start of the use for movable property and 9 years after the year of putting into use for immovable property. A choice for the OVOB will in principle apply for three years to avoid abuse.
The OVOB scheme will be optional. In case of an annual turnover below the specified amount, the entrepreneur can opt not to apply the OVOB, and instead pay VAT due, keep VAT records and file periodic VAT returns. A request for application of the new OVOB must be received by the tax authorities no later than 20 November 2019. The new OVOB can be advantageous for legal entities as BV’s and foundations. However, natural persons using the KOR scheme will no longer be entitled to deduct VAT in case they are going to apply the new OVOB scheme. VAT deductions on investments in the past might need revisions, leading to repayments of VAT. It may be possible that transitional arrangements are proposed during the internet consultation. We will keep you posted on further developments.
Author: Pieter Tielemans, HLB Netherlands, HLB Van Daal
VAT Directive 2006/112 / EC as regards the special scheme for small enterprises (SWD (2018) 9 final – SWD (2018) 11 final)
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