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 Dennis Vermeulen

By Dennis Vermeulen | July 16, 2016 |

IinH Value Added Tax

Value Added Tax

Value Added Tax (VAT) is a broadly based tax on transactions (known as “supplies”) of both goods and services, including the import of products. The principles and structure of the tax are contained in EU law. EU member states retain some discretion in certain areas, however, such as the rates of the tax and the sales limits for registration. Since 1 January 2007, when Directive (EC) 2006/112 replaced the “Sixth VAT Directive”, Directive 2006/112 is the main EU VAT Directive. Directive 2006/112 in turn was amended several times in the last few years and a consolidated version without legally binding value was published in January 2010 in the EU Official Journal.

Certain binding implementing provisions have been implemented by Council Implementing Regulation (EU) 282/2011. This Regulation ensures a uniform application of the VAT Directive. Under the new Directive, Member States have however maintained the power to deviate from the provisions of the Directive. As a result, the approach of national tax authorities can be slightly different in the various Member States. The Dutch Tax and Customs Authorities are known for their long term experience with international trade, distribution and their practical and pro-active approach when it concerns the international trade and distribution of product via the Netherlands. VAT is a multi-stage tax, being chargeable at every stage in the supply chain. In its simplest form, a business will charge VAT (“output tax”) on its sales (“supplies”), but will be entitled to deduct the VAT (“input tax”) it has paid on its purchases. The business will subsequently file a return at regular intervals with the tax administration and will deduct the input tax from the output tax and pay the balance. Where the input tax exceeds the output tax, the business will receive a refund. Certain supplies are exempt, principally in the financial and
property sectors. Where a business makes an exempted supply, it is not entitled to recover the VAT on the related costs. Where a business makes both taxable and exempted supplies, this situation is termed partly exempt, and the company will have to apportion its input tax between its taxable and exempt supplies. Only the input tax relating to its taxable supplies will be recoverable. Any foreign business that, under the VAT rules, makes supplies of goods or services in the Netherlands is, in principle, liable to register and to account for the tax. There is also a special procedure under which foreign businesses are entitled to reclaim Dutch input VAT, even if they do not perform taxable activities in the Netherlands.

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