ERIC KLEIN HESSELING
INTERNATIONAL TAX PARTNER, MAZARS IN THE NETHERLANDS
"The Netherlands follow international taxation rules with respect to taxation of e-commerce businesses."
"... we notice that entities from outside the EU are sometimes not familiar with the Dutch VAT system..."
What effect do current tax systems/schemes have on e-commerce in the Netherlands? (i.e. equalization tax on turnover of digital companies, taxing untaxed or insufficiently taxed income from all internet-based business activities)
Provided well-structured there is no need for uncertain tax positions, equalization taxes and double taxation. The Netherlands follow international taxation rules with respect to taxation of e-commerce businesses.
What are VAT-specific rules for e-commerce platforms in the Netherlands? Do extra VAT-specific rules exist for the Netherlands? (in addition to EU rules)
The EU / Dutch VAT system knows some exceptions for e-commerce platforms, i.e. entities performing electronical supplies of goods and services (‘e-commerce’). Difference needs to be made between supplies of goods and supplies of services to private individuals (not being VAT entrepreneurs).
The specific VAT rules for e-commerce manage where the supply of goods or services is VAT taxable as an exemption on the general VAT rules. This is relevant as the VAT rates differ throughout the EU. Performing VAT taxable supplies in a country might furthermore result in the (undesired) obligation to VAT register locally.
E-commerce supplies of goods are called ‘distance sales’. Distance sales are supplies of goods from an EU country to a private individual in another EU country. The EU supply of goods to private individuals is in the general situation VAT taxable in the country of the supplier. However, if the distance sales threshold is exceeded, the supplier needs to VAT register in the country of its customer and is due local VAT. The distance sales thresholds differ throughout the EU. At this moment, the EU VAT system (nor the Dutch VAT system) know a simplification rule for these suppliers. This might result in an administrative hassle for those entities. Another disadvantage of the current system is the difference made between EU suppliers and non-EU suppliers: the import of goods from outside the EU into an EU member state is not liable to VAT if the value of the good(s) does not exceed EUR 22. This means non-EU web shops can sell goods free of VAT to customers within the EU (if the value does not exceed EUR 22).
Electronical services to private individuals are VAT taxable in the country of the private individual as well. This means that the supplier needs to VAT register in the country of its customer and is due local VAT. At this mo- ment, a simplified system applies: the Mini One Stop Shop (‘MOSS’). Via this system, the foreign VAT can be filed in the country of the VAT entrepreneur and a local VAT registration is no longer required for the electronical services.
As of 2021, the EU will offer an extension of the MOSS regime for other intra-EU situations and non-EU situations as well. All EU member states will apply a uniform threshold of EUR 10,000 turnover (excl. VAT) per year for cross-border supplies of EU VAT entrepreneurs. If the threshold is not exceeded, the VAT entrepreneur does not need to VAT register in the countries of their customers. The threshold of EUR 10,000 will apply as of 1 January, 2019 for electronical services. The import threshold for VAT purposes of EUR 22 for goods from outside the EU will expire. This means that import VAT is due upon all imports into the EU. Although the thresholds and VAT rates differ per country, the framework of the regulations are the same in all EU member states.
Are there penalties for companies who do not comply with tax requirements in the Netherlands? If so, what are they, and how much do they impact foreign companies?
Penalties can be imposed up to 100% (in case of fraud) of the additional imposed taxes. More in general the penalties amount 25% or a fixed amount in case of e.g. filing too late. They impact foreign companies equally compared to domestic companies.
It is in general advised to hire professional financial service providers to and in such case it should not be ne- cessary to experience serious penalties (other than regular administrative fines for late filing etc.).
Are foreign companies eligible to a refund for Dutch VAT? If so, what does obtaining the refund entail? If not, how can foreign companies become eligible?
Foreign entities can reclaim Dutch VAT incurred if the conditions are met. Under the condition that the Dutch VAT is charged correctly. Within the EU, most countries offer a VAT reclaim in their own country. Non-EU VAT en- trepreneurs can file a request to claim the Dutch VAT in the Netherlands. Certain expiry dates apply.
What are the three main tips you give to foreign companies coming to the Netherlands? Specifically small- to midsized companies?
1. For your first impression check with the Netherlands Foreign Investment Agency (NFIA) in in your region (www. nfia.com).
2. No doubt that from a tax and business point of view the Netherlands is a good choice for service and distribution businesses and especially for e-commerce businesses. Let your choice to invest in the Netherlands predominantly depend on your business point of view: tax follows the business (and not the other way around).
3. Hire high quality service firms (audit, accounting, tax, legal) with experience in international business and with good language skills for your guidance.