Deduction limits in The Netherlands
Input VAT is generally deductible as long as the goods or services are used for business purposes. Where business expenses are used for both, business and private use, VAT is not deductible when the value of the private use exceeds €227 per year. This limit applies to the net value of the total expenses per employee per year.
In addition, the below list provides detail on deduction rules for each type of expense:
- Input VAT on hotel accommodation or restaurant meals is generally non-deductible.
- Input VAT on conferences, fairs and exhibitions is 100% deductible provided the expense is incurred for business purposes by employees of the company (restaurant meals are excluded)
- Business gifts are 100% deductible provided the €227 limit is not exceeded.
- Car rental, car repair and fuel expenses are 100% deductible. On car rental, the authorities often allow only an 84% deduction. The taxpayer must prove that the expense is wholly and entirely used for business purposes in order to deduct 100% of VAT.
- Taxi, train and other transport expenses is 100% deductible provided the expense is incurred for business purposes.
- Entertainment client expenses are 100% deductible provided the €227 limit is not exceeded.
A valid and fully compliant VAT invoice must be issued for each expense on which VAT is deducted.
Deducting VAT prior to the beginning of the economic activity is generally allowed provided the taxpayer can prove that the costs incurred where fully used for business purposes. These costs would be deducted in the first VAT return following the VAT registration.