Dutch VAT and cross-border services

Do you or your clients offer services to foreign customers? Does your company provide services abroad? Then VAT compliance can be quite a hurdle. On one hand, the services were delivered by a company settled in the Netherlands. The beneficiary of those services, on the other hand, is situated abroad. This makes filing taxes a confusing affair. The following sections aim to clarify VAT on international services:

Criteria
Where to file VAT?
How to file VAT?
Exceptions in general
Entrepreneurs
Non-Entrepreneurs

Criteria
The VAT on delivered products is mainly based on the physical transport of those products. But when it comes to services, the levy of Value Added Tax is less transparent. Several aspects determine where to file VAT. The customer’s status as entrepreneur or non-entrepreneur is the first main criterion. The second is the kind of service provided. Thirdly, where the company delivering the services is seated, is an indicator as well.

Besides the seemingly contradicting rules, various exceptions instigate the opacity of the matter. In addition, you still need to actually file VAT once you determined where to file them. Again, various criteria might trouble the compliance. The following outline aims to clarify the matter for you.

Where to file VAT?
Generally, VAT compliance is to be done in the customer’s country of residence. This rule holds when the customer is an entrepreneur. If that is not the case, VAT should be filed in the country where the service provider is located. Therefore, it is to your benefit to inquire after the status of your customer and his VAT-number.

Despite the simplicity of this directive, the compliance of VAT might still deviate.

Exceptions in General
Passenger transport
VAT compliance in the country where the actual transport takes place is mandatory in case of passenger transport. Hence, for cross-border transport, you divide the taxes among the countries in question. This division should reflect the proportion of the distances traveled in each country.

Restaurants and catering
This system also applies to restaurant and catering services. The country where the services took place charges VAT. For services on board of boats, trains and airplanes, though, the country of departure will levy VAT if the international transport remains within EU borders.

Rental  means of transportation
VAT on the rental means of transportation is to be filed in the country where the vehicle is delivered. The maximum duration to let means of transportation is 30 days. For ships, however, the leasing period reaches up to 90 days.

Entrepreneurs
Admission
The country where an art, culture, sports, science, education and/or pleasure event occurs, will charge VAT for the admission of entrepreneurs. Services other than granting access are in line with the general directive.

Non-entrepreneurs
Mediation
For the services an agent or intermediator provides to non-entrepreneurs, VAT compliance takes place in the country where the mediated service is levied. This directive only applies to mediations on behalf of another person. The mediator him- or herself cannot be a party to the settlement.

Rental means of transportation
Rental periods that surpass the period of 30 days – 90 days for ships – are met with VAT compliance in the non-entrepreneur’s country of residence. In case of pleasure crafts, the country of disposal is entitled to the tax.

Freight Transport
Value Added Tax on freight transport is twofold. The country where transport between EU countries departs, levies the tax. However, VAT compliance of transport transgressing EU borders depends on the distances traveled.

Load and offload
For VAT on transport, you should also take other transport services into account, such as load and offload. The country where the services happened is entitled to the tax.

Chattel
The previous rule also applies to chattel services to non-entrepreneurs. Once again, the country where those services are delivered will levy VAT.

Events
VAT on all event services, including the organization of the event, applies to the country where the event is located. The rule holds for a variety of event themes, such as arts, culture, sports, science, pleasure and education.

Electronic Services
Furthermore, the country of the non-entrepreneur’s residence will issue VAT on telecommunication, television and broadcasting services. The IP-address and IBAN number reflect the customer’s country. In case it is an EU member, the VAT rate of the country in question applies.

How to file VAT?
VAT calculation and compliance mainly depend on the customer’s entrepreneur status.
If the customer is indeed an entrepreneur residing in the EU, the reverse charge rule for inter-community services applies. Nevertheless, VAT should not be filed when the entrepreneur lives outside EU borders. Contrary, local VAT registration and compliance are in order for customers that aren’t entrepreneurs. In this case, the MOSS compliance (mini-one-stop-shop) suffices for electronic services.

Please note that Dutch VAT compliance and ICP declarations only mention services between EU members.

Do not hesitate to contact us for further information about VAT or taxes in general. We are happy to help you.

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