Solutions for Dutch import VAT due after Brexit
The United Kingdom has left the European Union on January 1st 2021 (Brexit). This has consequences for, among other things, VAT.
When importing goods from outside the EU to the Netherlands, VAT is due on these goods immediately upon import. Although this VAT may later be reclaimed, this will lead to a cash flow problem for the UK company.
However, there is a possibility to only first report this import VAT when filing a VAT return. This is beneficial, because this import VAT can then be reclaimed as deductible input VAT in the same VAT return. On balance there is no VAT payable over the import.
To be able to make use of the above arrangement, you must be in the possession of what is known as an “Article 23 permit“. As a foreign entrepreneur, you cannot request for an Article 23 permit yourself. For this purpose you must have a tax representative (‘fiscaal vertegenwoordiger’) in the Netherlands or have a Dutch company which is a tax resident of the Netherlands (just setting up a Dutch B.V. is not enough).
The tax representative of the foreign entrepreneur is responsible for meeting the obligations regarding VAT (and therefore also liable for the financial risks). These obligations are the result of performing activities in the Netherlands which are subject to VAT. In practice, the tax representative relieves the entrepreneur of all administrative burdens that arise from these activities. This gives the entrepreneur the freedom of doing business. The conditions for a tax representative to be met are as follows:
- This tax representative must be established in the Netherlands;
- The tax representative must provide financial security for VAT (bank guarantees, etc.) towards the tax office.
As an alternative a Dutch B.V. can be incorporated which will take over and perform the UK company’s trading activities within the EU. In order to make use of the above mentioned article 23 permit, the factual management (or majority part thereof) of the Dutch B.V. should be located within The Netherlands.
Brexit has other consequences for VAT as well. For example reclaiming local VAT imposed within the EU, as of 2021 a UK company will have to make use of paper forms instead of the EU online refund procedure.
TaxAble is your one stop shop for tax, accountancy and legal when setting up a Dutch company. We have advised and assisted various UK companies with setting up a Dutch B.V. company. We also advised on the related VAT matters.