Dutch VAT preparations in case of a hard Brexit

We advise you to apply for an article 23-permit

8 January 2019

VAT entrepreneurs transferring purchased goods from the UK to the Netherlands up to 29 March 2019 do perform intra-Community acquisitions in The Netherlands. They file Dutch VAT due on these acquisitions in their VAT returns and deduct the same amount of VAT as input tax in the same VAT return. As result, the VAT payable for these acquisitions in general is nil.

However, in the case of a hard Brexit this will all change. A purchase from the UK then will qualify as an import transaction. The moment the import of goods from the UK into The Netherlands takes place, Dutch import VAT immediately will be payable to Dutch customs. The logistic supplier/customs agency will pay the import VAT to the customs at the time of the importation and will send an invoice to the VAT entrepreneur, who must pay this immediately. The VAT entrepreneur can deduct the paid import VAT later in his periodic VAT return. The VAT entrepreneur thus will have to pre-finance this import VAT during a longer period (in case of quarterly VAT returns) compared to the situation before 29 March. In case of large and regular imports, this can lead to a substantial cash disadvantage.

Dutch postponed accounting system for import-VAT
This disadvantage can easily be avoided by applying for the Dutch postponed accounting system, the so-called article 23 permit. The Dutch tax authorities normally will grant the permit, if goods from outside the EU are imported on a regular basis. The permits ID number must be passed on to the logistic supplier/customs agency. In case of an import of goods from outside the EU into The Netherlands, the import VAT is not due at the time of the import, but the import-VAT will be shifted to the periodic VAT return. The import-VAT must be declared in this VAT return. In the same VAT return the same VAT can be deducted as input VAT. So effectively on the import no VAT must be paid at all.
Please note that the import-VAT must be filed in the VAT return under number 4a and deducted under number 5b, even if the result is nil. If you do not file the import-VAT correctly in the VAT return (under numbers 4a and 5b), the Dutch tax authorities will assume that the postponed accounting system for import-VAT is not used and the article 23-permit can be withdrawn.
Furthermore, note that we strongly recommend not to wait with a request for the article 23- permit until the end of March. It is expected that the Dutch tax authorities will then have to process many applications and therefore it will take longer to issue an article 23 permit. The Dutch tax authorities recently announced to grant the article 23 permit before the end of March if a request is filed before the 1 February 2019.
Finally, this system can be applied by Dutch resident entrepreneurs as well as by foreign entrepreneurs with a permanent establishment in The Netherlands. Foreign non-resident entrepreneurs without a permanent establishment in The Netherlands can only apply this system if they appoint a fiscal representative (Fiscal Rep). A Fiscal Rep fulfils the VAT-obligations of the foreign entrepreneur in The Netherlands (preparing and filing of VAT-returns, EU Sales lists and Intrastat returns). HLB can act as fiscal representative. For more information about Dutch VAT in the case of a hard Brexit, get in touch with one of our Tax Advisors.

Author: Pieter Tielemans, HLB Netherlands

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