Reverse-charging Dutch VAT
When you do not pay VAT on your revenue to the tax authorities, but to the entrepreneur to whom you offer your services instead, you reverse-charge VAT. When and how to apply this mechanism is explained below.
As of June 2, 2017, the reverse-charging mechanism is no longer optional, but mandatory in the following situation:
- Deliveries of game consoles, laptops, tablets, cellphones or microchips with a total value of EUR 100.000 or more;
- Telecommunication services to a customer who in his turn provides telecommunication services as well;
- In specific cases of deliveries concerning property or real estate, when your customer prefers the delivery to be subjected to VAT;
- For sales of real estate, based on a pledge or mortgage, Dutch tax authorities charge VAT twice. Not only should a debtor pay VAT for the delivery to the pledgee, but for the delivery of the pledgee to the purchaser as well. If the purchaser is an entrepreneur, the debtor has to reverse-charge the VAT on both deliveries.
Invoices for the previously mentioned services or deliveries should always mention ‘VAT reverse-charged’ and the VAT number of the entrepreneur to whom you paid the VAT. However, you may not include the VAT itself on the invoice, since Dutch law prohibits accepting such invoices when reverse-charging VAT is mandatory. Did you accept such an invoice or an invoice without the ‘VAT reverse-charged’ label? Then tax authorities will probably reject your application for VAT deduction. If that is the case, only approval of the State-Secretary will grant you deduction over the VAT you paid.
In the VAT return, you declare the revenue for which you reverse-charged VAT. Where the revenue should be mentioned, depends on the service or delivery in question. For services to foreign European entrepreneurs, as well as export outside EU-borders, the revenue should be declared in section 3a. Revenue of all other services or deliveries falls under section 1e.
If, on the other hand, VAT was reverse-charged to you, both VAT and the compensation you paid are to be declared. VAT on import transgressing EU borders should be mentioned in section 4a. Section 4b is intended for intra-community deliveries. VAT on the remaining services or deliveries falls under section 2a. Furthermore, in case you are entitled to VAT deduction, you may deduct the reverse-charged VAT as input tax in the VAT return.
Please do not hesitate on contacting us for more information or assistance in applying the reverse-charge mechanism.