Dutch VAT recovery on valuable services
2018 will bring many fiscal changes. One of them is the new rule concerning the recovery of VAT on valuable services. In what follows, the changes and their consequences are outlined.
The deduction of VAT is currently mandatory for all performed valuable services. After the year in which the service took place is terminated, the recovery goes into effect. This VAT relief remains the same for long-term services consisting of 100% VAT-charged actions in the first year, even though these actions might be reduced to 50% in the following years, while the other 50% of the service exists of exempt actions. This is also true for the reverse order.
Future rules of 2018
As of January 1, 2018, the rules concerning those long-term services will change for companies that are subject to Corporate Income Tax.
VAT recovery revision period
The first year on which a company encounters a valuable long-term service, VAT is recoverable for all the VAT-charged actions the service includes. Hence, you should keep all VAT into account that was levied on valuable services provided in 2018, of which the term will be prolonged for 2019, since 2018 is considered as the first year.
For every of the following years, you should verify the annual usage of the service. In case of valuable services in real estate, the revision period requires you the account for your services during the following nine years. For all other services, the revision period exists of just four years.
Adjustment of VAT deduction
During the VAT revision period, you examine whether the VAT recovery changes more than 10% in comparison to the amount of VAT relieved for the first year. For 2019, for example, the recovery is based on the investments (of 2009) you pay taxes on, the percentage of the VAT relief on those investments and the current VAT recovery rate concerning the general costs.
If the difference is indeed bigger than 10%, you can recover part of the VAT due. For services in real estate, the recovery is to 10% of the VAT and the percentage amounts to 20% for all other valuable services. The recovery revision is thus the deducted VAT for the first year minus the VAT relief in question.
In addition, valuable services may be sold during the VAT recovery revision period. Since this entails that the period is revised at once, services of which the sale is subject to VAT will be regarded as 100% VAT-charged for the remaining revision period.
If you have any questions concerning VAT or taxes in general, you can contact us. We at DTS are pleased to be of assistance.