What is a VAT identification number and where can I find it?
When you have incorporated a company and you are going to conduct business, you will often have to cope with VAT tax. The amount of VAT is determined by calculating a percentage of your sales or service fees. This knowledge base article will answer most of your questions as an entrepreneur on VAT tax. It is important to have a basic knowledge on VAT as an entrepreneur, since you have frequent exposure to it all year round.
What is a VAT identification number?
From sole proprietorship to limit liability companies, all businesses that pay turnover tax are required to have a VAT identification number (BTW-id). But only if the Dutch tax authorities also recognise you as a ‘VAT entrepreneur’. You need this number because it is compulsory as an entrepreneur to declare and pay VAT on products you purchase. Also, for purchases and sales within the European Union, it is mandatory to have a VAT identification number to transfer VAT from supplier to customer.
How to receive a VAT identification number?
Obtaining a VAT identification number does not require you to visit the tax office. If you have registered your company with The Netherlands Chamber of Commerce (KVK), you will receive your number upon registration. However, it is important that you provide all the details the tax authorities need. You may receive a temporary VAT identification number and after approval from the tax authorities you will receive your new VAT identification number. Usually your civil-law notary will register your newly incorporated company with the KVK, if this is not the case you will have to register your company with the KVK yourself. This mainly applies to sole proprietorships.
The differences between the VAT identification number and sales tax number
The main difference between the two is that when contacting the tax authorities, you use your sales tax number (‘omzetbelastingnummer’). For all the contact you have as an entrepreneur with (potential) customers, you use your VAT identification number. You put this on things like your website, invoices and other means of communication. VAT returns and sales tax return essentially mean the same thing. Usually these two terms are interchangeably.
VAT on goods and services
You, as an entrepreneur, are obliged to charge a tax rate of 21% on services and goods you offer/sell. However, there are two other rates that can be levied on certain goods and services. Namely, a rate of 0% and of 9%. Below is an overview of which goods and services are subject to an exemption and which rate applies:
Goods with 9% VAT
- Food products.
- Agricultural goods.
- Medicines and aids.
- Art, collectibles and antiques.
- Books and periodicals.
Goods with 0% VAT
- Goods you supply to foreign countries.
- Goods that have not yet been imported.
- Goods that you supply to (or in) a VAT warehouse (btw-entrepot).
- The delivery of ships and aircrafts.
- The supply of ships and aircrafts.
- Excisable goods.
- Solar panels.
Services with 9% VAT
- Repair of bicycles.
- Repair of shoes and leather goods.
- Repair services of clothing and household linen.
- Hairdressing services.
- Certain domestic work.
- Camping services.
- Accommodation services.
- Providing access to cultural and recreational events and facilities.
- Performance by performing artists.
- Providing opportunities for sports practice and bathing (including swimming pools and saunas).
- Passenger transport services.
- Supply or lending of ebooks (the 9% rate applies only if the ebook is similar to the physical publication to which the 9% rate applies).
Services with 0% VAT*
- Services when importing and exporting goods to countries outside the EU.
- International passenger transport.
- Work on goods exported to non-EU countries.
- Intermediation of transport, storage and importation installation of solar panels.
* You must be able to prove with your records that you were justified in applying the 0% rate.
VAT for foreign entrepreneurs and VAT return
If your company is located outside the Netherlands, but you conduct business in the Netherlands, you are still subject to the Dutch VAT regulations. Once a quarter, you must file your VAT return. You must file it no later than two months after the end of each quarter. This applies even if you did no business in the Netherlands during that period and also if you have to refund VAT.
Small businesses scheme (KOR)
The small business scheme (Kleine ondernemersregeling) is a VAT exemption for: natural persons (or partnerships of these) and legal persons who do not achieve higher sales than €20,000 per calendar year. If you want to apply for the small business scheme you must also qualify as a ‘VAT entrepreneur’ in the eyes of the Dutch tax authorities, and your company must be established in the Netherlands. If you use the small business scheme you do not charge your customers VAT. You do not file VAT declarations, but you cannot deduct VAT on business costs and investments.
Which VAT is deductible?
As an entrepreneur, you are allowed to deduct the VAT charged to you. You can deduct the VAT in your VAT return. You do this in the tax return for the period in which you receive the invoice. However, you may not deduct VAT on private expenses, expenses for your exempt turnover*, expenses for food and beverages in a catering establishment, employee benefits, gifts and business gifts of more than €277 per person per year**.
* This is the turnover for which you do not charge VAT to your customer.
** If you exceed €277, you have no VAT deduction for the entire price.
The VAT system in the Netherlands is a complicated one. Do you have any questions regarding this topic? Schedule a free consultation with one of our advisors!
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