VAT for e-commerce in The Netherlands
The practise has seen an explosive growth in the selling of products over the internet in the Netherlands the last few years. E-commerce is hot, and the Netherlands is ambitious in this area. Alongside Dutch companies, many foreign companies are choosing the Netherlands as a ‘hub’ for their e-commerce activities. Why is this the case?
Popularity of e-commerce
There are a number of reasons why companies are choosing the Netherlands. In short, here are the five major advantages:
- The Netherlands is centrally (logistically speaking) located in Europe.
- Connections to the extremities of Europe are optimum.
- The Netherlands generally has excellent logistics.
- The Netherlands offers quality logistics at a good price.
- There are attractive tax and customs regulations.
As a VAT specialist we will focus primarily on the fifth point.
Dutch customs serve as an example to many other countries in Europe. Customs here are known for their business friendly and cooperative attitude. Research from the European Commission shows that Dutch customs scored 93/100, with the European average lying at 62. Non-EU companies can expect quick handling of their imports to the Netherlands, leading to a reduction in costs.
VAT for e-commerce
A similar picture applies to revenue taxes in the Netherlands. Research undertaken by a colleague shows that the country scores highest on “VAT attractiveness”. In the Netherlands there is the possibility to shift the VAT on imports. This means that companies importing goods do not have to pay the VAT directly upon importing. They can delay this until their periodic VAT declarations. On these declarations the import VAT is also immediately deductible, meaning that the import is effectively VAT neutral. There is no other country in Europe that offers the same facility. It means that an e-commerce company located here enjoys a significant cash flow advantage.
Warehousing for e-commerce
In addition, the Netherlands has many other advantageous rules regarding warehousing. The import duties and VAT can be postponed indefinitely by storing goods in a bonded warehouse.
Of course, there are other VAT regulations that are challenging for e-commerce companies. These are often rules that apply in every EU member state. The European Commission has submitted proposals to simplify VAT rules, which should provide the necessary burden reduction for e-commerce companies.
VAT charges without an EU VAT number
At present, if a customer without an EU registered VAT number buys goods from an e-commerce entrepreneur established in the Netherlands, Dutch VAT must be charged by the e-commerce entrepreneur.
E-commerce distance selling
Different VAT rules can apply if certain threshold amounts are exceeded when selling goods.
If there is evidence of so called ‘distance selling’, the VAT rate of the country where the private customer is located will be applied to the delivery of goods. This means that an e-commerce entrepreneur located in the Netherlands must register with the tax authority of the other EU country in order to complete their deliveries.
Distance selling is evident when a company sells to clients in a specific EU country in a specific year, in which the value of the sales exceeds the threshold amount of that country. The e –commerce company that supplies the goods to customers in other EU countries must therefore monitor how many euros worth of products is supplied to customers in that particular EU country.
Challenging VAT rules for e-commerce
You will understand that there is an extensive range of VAT rules for companies that can be very challenging. Imagine that you sell products to individual customers in 8 different countries. Business is going well, so you have exceeded the minimum threshold amounts for VAT in these countries. This means that you must register for VAT in 8 different countries and must then make a VAT declaration in all of them. The European Commission has understood this inconvenience and has therefore proposed new regulations for e-commerce.
MOSS ruling for e-commerce
The European Commission has proposed the possibility for e-commerce companies to make use of the so called Mini One-Stop Shop ruling (MOSS). The MOSS ruling now only applies to companies that sell digital services to customers in other EU countries. This applies to telecommunication services, broadcasting services and electronic services. The MOSS system does not yet apply to the supplying of goods and services that are not digital.
Advantages of the MOSS ruling
The beauty of the MOSS scheme is that the VAT that is due in other EU Member States can be declared via a single EU country. In the Netherlands the MOSS system can be used to login to a protected part of the tax authority website. Entrepreneurs can then declare the VAT that he owes in each EU country. The tax office then ensures that that the BTW payments end up in the right place. This saves an enormous amount of time on registrations and different declarations. As stated earlier the European Commission is looking into extending the MOSS ruling to companies that supply physical goods to private customers in other EU member states. In addition, they want to abolish the threshold amounts, meaning that companies will no longer need to track sales in each EU country against the threshold amounts.
Threshold for MOSS ruling
The idea of a general threshold of €10,000 will continue to apply, so that an entrepreneur doesn’t have to do VAT declarations for relatively small amounts in other EU member states, but can simply apply local VAT.
The current regulation ensures that entrepreneurs might have to stop their sales in other EU member states when the threshold amount is within sight. They might also choose to not sell across the border due to anxieties over regulations. The good news is that better VAT times are coming. However, e-commerce companies will have to be patient, as these plans will only apply as of 2021.
Do you want to optimize your VAT processes for your (e-commerce) organization? Contact our VAT specialists for advice.