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VAT – purchases outside the Netherlands and VAT

In the event you are a Dutch Value Added Tax (hereafter referred to as VAT) entrepreneur, you can reclaim the Dutch paid VAT on purchases that can be considered a business cost or a business investment. But what happens if you make purchases outside the Netherlands, what happens with the paid VAT/sales tax then?

The first action you as entrepreneur need to take is to inform the company from whom you are buying that you are an EU VAT entrepreneur with a EU VAT number. Inside the EU the company will request you for your VAT number, put that on the invoice and charge you at 0% local VAT. Outside the EU they do not really bother about you being a EU VAT entrepreneur.

What if the EU company is not willing to work with you and simply charges you with local VAT? Then you have two options. Regardsless of these options you have to pay the invoice. But after you paid you can reclaim this amount of paid VAT via the Dutch tax office. This is rather a procedure with all kinds of limitations and time consuming. Time consuming for you to make the request and time consuming to actually receive the refund. The other option is to take it as it is and simply deduct in your Dutch result the full costs including the foreign VAT.

In the 0% VAT situation there is a condition. The condition is that it needs to be obvious or proven that the product purchased has actually crossed an EU border within the EU. If that cannot be determined, then this is regarded a local transaction with local VAT to be paid. So when you drive to a neighboring country to pick up the goods, then you have a problem proving the product actually went over the border. This can be solved by having a transport company transport the goods for you.

VAT is not a simple legislation where you pay and reclaim VAT. There is more to it and the tax office is keen to audit your administration to see if you comply with the rules.

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