Charging VAT as a Dutch entrepreneur with clients outside of the Netherlands
How do you charge VAT as a Dutch entrepreneur? In this article, Taxsight focuses on the VAT on services rendered, such as services delivered by business consultants or IT consultants.
VAT (value-added tax) is called Omzetbelasting (OB) or Belasting toegevoegde waarde (BTW) in Dutch. The VAT regulations for services and the sale of products are not completely the same, especially when you do business outside of the Netherlands. Here is how it works when it comes to delivering services.
VAT rates in the Netherlands
In the Netherlands, there are three different VAT rates: 0%, 9% or 21%. On top of that, you also have the so-called VAT exempt services (dentists and certain therapists). However, the standard VAT rate in the Netherlands is 21%. Many freelancers who provide services fall under the 21% VAT rate. This rate is charged when you provide services to clients in the Netherlands, including services rendered to both businesses and individuals. The 21% VAT rate also applies when an entrepreneur delivers a service to an individual who lives outside of the Netherlands but within the EU.
Reverse-charge mechanism EU
In the European Union, there's the reverse-charge mechanism. With this mechanism, the VAT can be reverse-charged to your European business clients. This means that you don’t charge any VAT when you deliver a service to a business client within the European Union. There are, however, some requirements; to reverse-charge the VAT, it is important to verify that your European business client has an existing European VAT number. Your client - not you as a Dutch entrepreneur - declares the VAT in their home country. The VAT that the European client declares can, in general, be claimed in the same VAT return and will result in a zero payment for your client eventually.
ICP declaration (Intra-Community transactions)
When a Dutch entrepreneur invoices a business client within the European Union, an ICP declaration (Intra-Community transaction) is also required. The ICP declaration needs to be filed on top of the regular VAT filing, and includes the VAT numbers of the clients within the European Union and the sales amount made to those clients.
Individuals and business clients without a VAT number in Europe
The VAT cannot be reverse-charged in case you invoice a business client within the European Union who, for any reason, doesn’t have a European VAT number. The VAT can also not be reverse-charged if the client is an individual within the European Union. The applicable VAT rate should in that case be charged and it will be due in the Netherlands.
Services delivered by Dutch consultants to non-European clients are in general not taxed with the Dutch VAT. This applies, for example, when a business consultant provides services to clients outside the European Union. Generally speaking, it does not matter whether the non-European client is an individual or a company.
Do you still have any questions about charging VAT? Or any other tax questions at all for that matter? If so, do not hesitate to get in touch with Taxsight! Their tax advisors, who have years of experience working with local and international tax matters, can provide expert tax advice and services to the highest professional standard.