Deduction limits of VAT in The Netherlands
The Council of the European Union has granted the Netherlands the right to exclude VAT deductions under certain conditions, applicable from 1 January 2021.
As announced in December 2020, a request sent by the Netherlands to prohibit the right to deduct VAT on goods and services used by a taxable person for private use, non-business, or non-economic activity was approved by the Council of the European Union. The measure aimed to simplify VAT collecting procedures as well as prevent tax evasion and is for VAT deductions for more than 90% on the activity mentioned above.
What are the deduction limits in The Netherlands?
In general, VAT incurred on food-related expenses is not recoverable in the Netherlands.
VAT paid on travel expenses, such as public transportation and fuel can be fully recovered. If it can be proven that a car rental was used only for business purposes, businesses should be able to claim back 100% of the VAT incurred. Otherwise, a standard rate of 84% can be recovered.
You can find more information on the deduction limits in the Netherlands in our manual.
How can I recover Dutch VAT?
Input VAT can be recovered in two ways: via a VAT return for companies that already possess a VAT number in the country where the VAT was incurred, or through the 8th or 13th directive for non-established businesses.
Businesses with a Dutch VAT number
Companies who are already VAT registered in the Netherlands can include their incurred input VAT on their periodic VAT returns. The amount will be deducted from the output VAT, and if the input VAT is greater than the output VAT, the business will be in a credit position. Rules regarding credit positions differ by country – in some countries, this amount can be carried over to be deducted on the following VAT return until the credit runs out. Then, the VAT returns would be submitted as normal.
Businesses established in another EU country but that are not VAT registered in the Netherlands can submit their VAT refund claim through the 8th Directive, granted that they have made no taxable transactions there that would require them to be VAT registered. It is important to keep track of all invoices and other relevant documents as proof in the case of an audit from the tax authorities.
Foreign non-EU companies that have incurred VAT in the Netherlands that do not have any obligation to be VAT registered there (i.e. they have not carried out any taxable activity there) can reclaim their incurred VAT through the 13th directive. The deadlines and procedures to submit these claims are not uniform throughout the EU, and in some cases, it is required that the business’ country of establishment have a reciprocity agreement in place. In other cases, the non-EU company might be obligated to appoint a fiscal representative.
For even more details on how to claim a VAT refund, check out this link.
Need help claiming back your VAT?
Knowing which process to choose and the deadlines and requirements can be confusing. Speak to an agent today to verify which approach would suit you best and to learn more about how we can assist you with your VAT refund.