VAT measures

Entrepreneurs involved in international trade can expect radical changes to VAT. The rate of VAT for digital publications will also be reduced. There will also be changes to transfer tax and insurance premium tax.

Quick fixes for international trade

At the end of 2018, the European Council adopted the proposals for four so-called ‘quick fixes’ aimed at simplifying VAT for international trade.

 

With the Act implementing the Directive as regards harmonising and simplifying trade between Member States, the Cabinet now intends to implement these quick fixes. The quick fixes relate to:

 

  • Cross-border call-off stock arrangements in the EU
  • Intra-Community supplies of goods in the case of chain transactions
  • Proof for application of the zero rate in the case of intra-Community supplies
  • Reinforcing the status of the VAT identification number

The quick fixes will have a considerable impact on entrepreneurs involved in international transactions in goods.

 

Quick fix 1 – Simplifying cross-border call-off stock arrangements in the EU

 

The first quick fix involves implementing an EU-wide scheme whereby entrepreneurs with call-off stock at the premises of a customer in another EU Member State can refrain from registering for VAT in that country, under certain conditions.

 

In order to reduce delivery times, entrepreneurs often store their stock at the customer’s premises. The goods remain the property of the entrepreneur until they are picked up from the stock by the customer. In domestic situations, this does not result in an excessive administrative burden for VAT purposes. However, in situations where the entrepreneur and its customer are not residing in the same EU Member State, such transactions require a great deal of administration under the current rules. For instance, the supplier needs to report the transfer of its own goods to the EU Member State of the customer. In order to comply with this, the supplier needs a VAT registration in the EU Member State of storage.

 

Although many EU Member States, including the Netherlands, already have simplification arrangements for call-off stock, these differ by country. This is the reasoning behind introducing the EU-wide arrangement to replace the individual arrangements in the EU Member States.

 

Under the new rules, an intra-Community supply is deemed to take place only when a) the final customer is entitled to take ownership of the goods, b) the supplier has no business location or permanent establishment in the Member State of arrival, c) the customer has a VAT identification number in the host Member State and d) the supplier records the transfer of the goods in the register and in the intra-Community supplies statement (ICS Statement). In this situation, the sender does not need a VAT identification number in the Member State of arrival. An additional condition is that the customer in the Member State of arrival must have picked up the goods from the stock within 12 months after the transfer of the goods.

 

Comment by PKF Wallast

We advise entrepreneurs that deal with call-off stock to review their current call-off stock arrangements and check whether, as a result of the new rules:

  • changes are needed to existing call-off stock arrangements
  • simplifications can be made
  • existing VAT registrations can be cancelled

Quick fix 2 – A scheme for attributing the intra-Community supply in the case of chain transactions

The second quick fix involves implementing an EU-wide scheme relating to cross-border chain transactions in the EU.

 

In the case of chain transactions, the same goods are dealt with by three or more parties in consecutive supplies and the goods are sent directly to the address of the final party. In cross-border situations, this often raises the question of which link is the intra-Community transaction.

 

The quick fix aims to create clarity for situations where the intermediary in chain transactions arranges the transport (or has this arranged). In those situations, entrepreneurs can rely on the VAT identification number provided by the intermediary when declaring chain transactions. Depending on the VAT identification number it provides, the intra-Community transaction is attributed to the relevant link:

 

  • If the intermediary provides a VAT identification number of the Member State of departure, the supply by the intermediary is deemed the intra-Community transaction.
  • If the intermediary gives the VAT identification number of another Member State, the supply to the intermediary is deemed the intra-Community transaction

 

Comment by PKF Wallast

We advise entrepreneurs trading in goods within the EU to investigate:

  • the extent to which they are affected by chain transactions in the EU
  • whether existing arrangements need to be adapted in light of the new rules
  • whether existing VAT registrations can be cancelled

Quick fix 3 – Proof for application of zero rate to intra-Community supplies

The third quick fix involves implementing an EU-wide scheme governing the proof required to apply the zero rate to intra-Community supplies.

 

In order to be able to apply the zero rate to intra-Community supplies, the entrepreneur must be able to demonstrate that the goods were dispatched to another Member State. In practice, Member States still have divergent approaches. The new scheme intends to put an end to this and introduces a rebuttable presumption if there are two non-contradictory evidential documents from two non-dependent parties (for example an invoice from the shipper and a signed consignment note).

 

Comment by PKF Wallast

We advise entrepreneurs trading in goods within the EU to investigate:

  • whether their current processes for managing and archiving documentation in the context of cross-border goods transactions within the EU are sufficient
  • where necessary, to revise agreements with suppliers and/or customers

Quick fix 4 – Reinforcing the status of the VAT identification number

The fourth quick fix involves implementing an EU-wide scheme under which having a valid VAT identification number is regarded as a material requirement for the application of the zero rate to intra-Community supplies.

 

As a result of the new scheme, entrepreneurs will no longer be able to apply the zero rate if they do not have a valid VAT identification number, meaning that the domestic rate would need to be applied. However, there is an option for redress. The actual form this will take will be further explained in the VAT Act Implementation Decree 1968 (Uitvoeringsbesluit 1968), which is to be amended.

 

Comment by PKF Wallast

We advise entrepreneurs to investigate whether their:

  • systems are adapted to this new requirement
  • customer details are complete and correct
  • processes require a check in the VAT Information Exchange System (VIES)

VAT rate to be lowered on e-books, newspapers and magazines

As of 1 January 2020, ‘books, newspapers and magazines delivered by electronic means’ will fall under the reduced VAT rate (9%).

 

From 1 January 2020 onwards, the reduced VAT rate will apply to books, newspapers and magazines delivered by electronic means. From this point on, it will no longer matter in terms of VAT treatment whether a book is delivered on paper or on a CD, for example, or whether the digitised content of a book is offered via electronic means. This will remove the unequal treatment of physical publications, on the one hand, and electronic publications, on the other.

 

In addition, the reduced VAT rate will also apply to the granting of access to news websites (as well as apps), such as those of daily and weekly newspapers and magazines. It should be noted that in order to apply the reduced VAT rate, the electronic publications and news websites cannot consist exclusively or mainly of advertising material, video content or listenable music.

 

To determine whether a publication is delivered via electronic means, it must be checked whether the publication is comparable with a physical publication to which the reduced VAT applies. This comparability has to be assessed in terms of the content and use of the publication provided via electronic means, based on social attitudes (seen from the point of view of the average consumer).

 

It should be noted that the application of the reduced VAT rate depends on whether the publication is intended to form a book, daily or weekly newspaper, or magazine in its entirety. An electronic publication consisting of an individual chapter from a book or a selection of (news) articles is therefore not covered by this.

 

The reduced VAT rate also does not apply to user options associated with an electronic publication that are not related to the functional accessibility of the publication (such as navigation via a contents page, a search function, adjusting the view by increasing and decreasing the size of the text and adjusting the light intensity). These include dynamic and technological elements, such as interactive maps, reviews, reactions, games and communication options. This is because such electronic services are not considered to be comparable with a physical publication, the content of which has a scope that is determined in advance and the use of which relates to accessing this content for the purpose of reading it.

 

Comment by PKF Wallast

We advise entrepreneurs to investigate:

  • how their current range of products relates to the new scheme and, when selling in foreign countries, the way in which this has been implemented by other EU Member States
  • what they have on hand to substantiate the correct application of the rate (for example substantiation based on usage statistics)
  • to coordinate with suppliers and/or customers where necessary

Transfer tax measures

It is proposed to increase the transfer tax for non-residential properties by 1%, from 6% to 7%, with effect from 2021. Non-residential properties include industrial buildings, business premises, residential building plots, hotels and guest houses. For residential properties, the transfer tax will remain at 2%.

 

Comment by PKF Wallast

The importance of a clear distinction between residential and non-residential properties will become (even) more important due to this rate increase. At the time of writing, we are awaiting a judgment of the Supreme Court relating to the issue of whether or not the transfer of an old industrial building that is in the process of being converted to one or more residential properties is taxed at the reduced rate of 2%. This judgment will increase even further in significance with the increase in the regular rate as of 2021.

 

Insurance premium tax measures

In 2020, the 21% insurance premium tax will no longer apply to insurance policies that fully or partially cover potential financial obligations that an employer has in relation to the obligation to continue paying the salary of an employee in the event of sickness or if self-insurers themselves bear the risk of paying sick pay, benefits under the WGA and death benefits.

 

In 2020, the 21% insurance premium tax will also no longer apply to large-scale insurance against bad weather. This incentive is intended to make it more attractive for farmers to insure their crops against the effects of extreme weather.

S.H. (Stephen) Vergeer MB RB Advisor
S.H. (Stephen) Vergeer MB RB, Advisor
dr. J. (Jeroen) van Strien Advisor
dr. J. (Jeroen) van Strien, Advisor
Prof. dr. J.C.M. (Hans) van Sonderen Advisor
Prof. dr. J.C.M. (Hans) van Sonderen, Advisor
mr. drs. R.W. (Ruud) van der Linde Advisor
mr. drs. R.W. (Ruud) van der Linde, Advisor
mr. S. (Sicco) van den Berg Advisor
mr. S. (Sicco) van den Berg, Advisor
I. (Ibrahim) Ahmed LL.M. Advisor
I. (Ibrahim) Ahmed LL.M., Advisor
drs. A.T. (Andor) Valkenburg Manager Amsterdam, Advisor
drs. A.T. (Andor) Valkenburg, Manager Amsterdam, Advisor
mr. H.J.A. (Huub) Nacken Advisor
mr. H.J.A. (Huub) Nacken, Advisor
mr. R.C. (Ron) Henzen Advisor
mr. R.C. (Ron) Henzen, Advisor
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