On January 1, 2020, the Dutch VAT rules for smaller businesses (Kleine Ondernemersregeling or KOR) were amended.
Smaller entrepreneurs may qualify for this so-called ‘smaller businesses’ scheme if the Dutch VAT they paid is below €1.883 per that calendar year. The new rule will have a more general and discretionary exemption; it will be a full exemption and related to a maximum turnover of €20.000 per annum. Additionally, the KOR will be available for both natural persons as well as for corporate entities, such as a limited liability corporate entity (B.V.).
The rule should lower the administrative burden for smaller entrepreneurs, e.g. for Airbnb landlords.
How do you calculate the turnover maximum of €20.000?
In short, the turnover concerns all sales in the calendar year that the entrepreneur in the Netherlands realizes. Reverse-charged VAT should also be taken-into-account.
1. Potential benefits
Invoices sent after the new KOR has been applied are set without VAT. This can be beneficial, as your price will be lower than your competitors’ who have not applied for the KOR. The price for private individuals will be 21% or 9% lower, as you no longer charge VAT. The last advantage of this rule is that entrepreneurs no longer have to worry about the deadlines for VAT filings. By using the KOR, a lot of entrepreneurs are no longer required to file their VAT each quarter.
2. Potential negatives
Potentially, there are a few negatives when it comes to this new tax rule:
a. Increased expenses
Companies that do not apply for the KOR will still charge their customers 21% VAT. This means that if you buy something from a company that does not use the KOR, your expense will increase by 21%. So, you will have to adjust your prices.
b. No VAT-number
Some platforms, such as Shopify, Uber and Amazon, sometimes require you to have a VAT number if you want to sell your products through their platform. Since you will not be able to use your VAT number anymore with the new KOR, this can be a downside for some entrepreneurs.
c. Administration obligation
There is a misconception that if you use the new KOR rule, you no longer have to keep records. However, it is important to know that if entrepreneurs use the new KOR rule, the administration obligation will continue to exist.
d. VAT can’t be reclaimed
Finally, it is important to know that VAT cannot be reclaimed from the Dutch Tax Office at the end of a quarter. So, if you have a company with a lot of Dutch expenses, you should know that it is no longer possible to claim back the VAT on these expenses.
If you have successfully applied for the new KOR, you do not have to charge VAT. On the other hand, any VAT charged to you cannot be deducted. The new KOR rule applies for three years. However, if you exceed the maximum turnover, the rule expires automatically.
The choice as to whether you should make use of this ruling is therefore not one that can be easily made. After all, it can determine the future of your business.
Why will RPS LEGAL make a success of your company incorporation?
RPS LEGAL is a law firm specialized in assisting and advising International Companies and Start Ups with business expansion to The Netherlands and Europe. We are dedicated to making it easier for your businesses to start a company in the Netherlands. We facilitate the whole process setting up a company incorporated under Dutch law.
mr R.P. (Rolf Peter) Rothuizen LL.M.
Specialist in Business Law, Company Law and Tax Optimisation
+31 6 – 50 87 48 38