Turnover tax (VAT) for businesses in the Netherlands

If you are an entrepreneur in the Netherlands and run a business or practise a profession independently in this country, you have to pay turnover tax (i.e. VAT, known in Dutch as ‘omzetbelasting’ or ‘BTW’) on your turnover. This also applies if your company has a permanent establishment in the Netherlands which operates independently. The legal form (e.g. private limited company or public limited company) is irrelevant as regards payment of VAT. A foundation or association will also have to pay VAT if the Tax and Customs Administration regards it as an enterprise. With the calculation tool Incidental VAT return of the Tax and Customs Administration you decide whether you have to submit a VAT return.

Conditions

The Tax and Customs Administration does not automatically regard you as an entrepreneur for VAT purposes. The conditions for VAT are different from the conditions that apply for income tax. Therefore it is possible that you are an entrepreneur for VAT purposes, but not for income tax purposes. The Tax and Customs Administration applies various criteria to determine whether you are an entrepreneur for VAT purposes, including the following:

• You are self-employed or run your own business.
• You are employed by someone else and do other work as well.
• You have a right to derive income, for instance by operating a building.
• You are a private individual who sells a new vehicle to a person in another EU country.

What must you do?

The VAT that you receive from your customers must be paid to the Tax and Customs Administration. You can reduce this amount by the VAT that you yourself paid to your suppliers. You therefore pay VAT on the difference between your purchase price (including costs) and the sale price. You must calculate the VAT on the total payment and all additional costs. These additional costs include shipping costs, travelling expenses, telephone expenses, packaging costs (except for deposits), etc. You must declare the turnover tax online. If you have paid too little or too much VAT in the past 5 years, you are obliged to correct this in your VAT return as of 1 April 2012.

In addition, you are required to state the VAT number on your invoices. You must also keep a list of all invoices sent and received.

Turnover tax for entrepreneurs outside of the Netherlands

Different rules apply if your company does not have an establishment in the Netherlands, but does provide goods or services to buyers in the Netherland, or if you incur costs over which you are charged turnover tax in the Netherlands.

Turnover tax when outsourcing work

If you outsource work to another entrepreneur, the latter will have to pay the VAT on this work to the Tax and Customs Administration. In some cases, a reverse-charge mechanism applies. This means that you have to declare and pay the VAT yourself. This reverse-charge mechanism is compulsory in situations such as the following:

• you outsource work to a subcontractor based outside the Netherlands;
• you are the main contractor and you outsource work to a subcontractor in particular sectors.