Increase of the reduced VAT rate from 6% to 9%
As per January 1, 2019 the reduced VAT rate will increase from 6% to 9%. This measure is part of the Dutch budget proposals for 2019, that have been published on September 18, 2018. Although this proposal is still subject to the approval of the Senate and the House of Representatives, we expect this increase to become effective as per January 1, 2019.
The reduced VAT rate applies to goods and services listed in Table 1 of the Dutch Turnover Tax Act 1968. The increase of the reduced VAT rate mainly affects the food, catering, agriculture, recreation, sports, culture and construction sectors. The reduced rate includes for example, food, hotel accommodation, books and newspapers. Services of barbers, bicycle repair and visits to the cinema also are subject to this reduced VAT rate.
The moment of a delivery or service is decisive when determining the applicable rate. For (the majority of) deliveries, the moment of delivery takes place at the time the goods are transferred to the buyer. The moment of services takes place when the service is completed.
When the moment of a delivery or service is in 2018, the current 6% rate applies. Even if the invoice is issued in 2019. In this respect it should be noted that generally invoices should be issued no later than the 15th day of the month following the month in which the service was performed, or the delivery took place.
When the moment of a delivery or service takes place in 2019, in principle the 9% rate applies. The Ministry of Finance) has announced that the tax authorities will not correct services rendered in 2019 for which the compensation has already been received in 2018. This concerns, for example, concerts or sport-events that have already been paid this year but are planned after January 1, 2019.
We advise to already prepare for the new increased VAT-rate. Since this increase has an impact on the administration, the prices of goods and services, the invoicing and the VAT- filings. In this respect the following might need to be considered:
- Adjust the accounting programs so that as per January 1, 2019 the correct VAT rate is applied;
- Ensure that the correct VAT rate is stated on the invoices and that the data to determine whether the 6% rate or the 9% rate applies are clearly recorded;
- Adjust the cash register systems to the reduced VAT rate of 9%;
- In case no or a limited right on the deduction of input VAT exists, it might be considered to already purchase goods in 2018 (instead of 2019);
- Include the new VAT-rate, when quoting for services and goods that need to be provided in 2019.
- The increase of the reduced VAT rate can be surcharged in contracts already in execution, regardless of any contractual agreements made in this respect. This since arrangements that prohibit the surcharge followed by a VAT increase are void.
In January 2019, the situation may arise that two different reduced VAT rates need to be declared: 6% for services performed in 2018, but for which the invoice is issued in January 2019, and 9% for services performed in January 2019, for which an invoice will be issued in January 2019. The performance for which invoices with 6% have been issued in 2019 must be included in question 1c of the VAT return.
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