Value-added tax measures 2018

The Dutch cabinet intends to raise the lower VAT-rate from its current level of six percent to nine percent, as was already mentioned in the coalition agreement. The measure in question, which is to be included in the Tax Plan for 2019, is in line with the cabinet’s campaign of lowering labour-related taxes while putting up consumption taxes. No supplementary legislation is being envisaged for the transition from the old to the new situation.

Sports exemption

The sports exemption for value-added tax purposes is to undergo change in response to rulings by CJEU, the Court of Justice of the European Union, the upshot of this being that more often than not it will no longer be permissible to run sports facilities on a value-added taxable basis. The Dutch Ministry of Health, Welfare and Sport is to introduce a subsidised scheme to further the development, maintenance and preservation of sports facilities by sports clubs and municipalities. The scheme in question is to be funded using the proceeds of transforming the sports exemption in terms of liability for value-added tax, with application of the exemption bringing with it the lapsing of entitlement to deduction of input tax paid.

Small Businesses Scheme

The value-added tax regime entails a special arrangement for small-scale business ventures. This so-called Small Businesses Scheme (Dutch acronym: “KOR”) currently applies only to natural persons whose value-added tax dues net of input tax paid come to no more than € 1.883 per annum, and who are entitled under the current scheme to a reduction, in the amount of the outstanding value-added tax, of the value-added tax due and payable to an annual maximum of € 1.345. Small business owners whose value-added tax charge the scheme thus reduces to nil have the further option of asking the Inspector of Taxes to exempt them from their administrative and invoicing duties, enabling them as soon as their request has been granted to leave out the value-added tax component from their invoices. (Of course their entitlement to deduction of input tax paid ends at the same time.)

The cabinet has proposed to convert the Small Business Scheme into a sales-dictated value-added tax exemption scheme. The new sales limit – to apply to all small-scale businesses irrespective of legal form – is to be set at € 20.000 per annum, “sales” being defined as any and all sales relating to products supplied and/or services rendered that are liable for Dutch turnover tax irrespective of tax rate and whether or not use has been made of the reverse-charge mechanism (from supplier to purchaser). The revamped Small Businesses Scheme is to take effect on the first day of January 2020.

(Small) Business owners who opt in favour of the revamped Small Businesses Scheme will be exempt from value-added tax filing duties and from administrative duties pertaining to their supply of products and/or provision of services domestically. It should be borne in mind, however, that the administrative obligation will apply to the small business owner, who moreover may find him or herself having to file value-added tax returns, where the liability for value-added tax has been transferred to him or her using the reverse-charge mechanism. The revamped Small Business Scheme – similarly to the version it is set to replace – will only apply to Dutch-based business owners or permanent establishments. The new Scheme will not, however, apply to the transfer of title to properties the business owner is to put to use within his or her business. The exemption provided for under the revamped Small Business Scheme will cease to be available (for reasons of non-compliance) as soon as a particular business owner cum user of the Scheme exceeds the sales limit for the calendar year. He or she will then come under the “regular” value-added tax regime, which involves the periodic filing of value-added tax returns.

A choice in favour of the revamped Small Business Scheme essentially applies indefinitely. The small business owner in question is free to cancel his or her exemption on completion of at least three years of having applied same. He or she will then have to wait another three years before regaining his or her eligibility for the Scheme. Any business owner who expects not to exceed the € 20.000 sales limit in 2020 and who is keen to apply the exemption scheme is required to communicate his or her choice in the manner prescribed by the Inspector of Taxes. This can be done from the first of June 2019 onwards. In order for the business owner to qualify for exemption from the first of January 2020 onwards, he or she needs to have communicated his or her choice to the relevant effect no later than by the twentieth of November 2019.

A transitional regime is to be slotted into place geared to (small) business owners who under the current Small Businesses Scheme enjoy exemption from administrative duties. The transitional regime will also ensure that the period until the first of January 2020 is be properly dealt with.

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Dutch version: Maatregelen omzetbelasting 2018