Applying the correct VAT treatment when issuing an invoice for services rendered can be tricky, and we get asked for quick help on a regular basis. No problem of course! But to make things easier, we’ve drafted this quick guide.
Below, you will find a flow-chart that will help you. And please note that this flowchart applies to a a business established in the Netherlands for VAT purposes that renders services.
Step 1: Establish where the VAT is due.
First step is establishing where the so-called ‘place of supply’ lies. The place of supply determines where VAT is taxed. The nature of the service as well as the status of the customer of the services are the main triggers for determining where VAT is due. The supply of services between businesses (“B2B services”) are as a matter of principle taxed at the customer’s place of establishment, while services supplied to private individuals (“B2C services”) are taxed at the supplier’s place of establishment. However, to this main rule several exceptions have been made for specific services:
Step 2: Draft the Invoice.
Once the correct VAT treatment for the services rendered is established, it is time to issue an invoice to the customer. Please note, invoices issued for regular services must be issued not later than the 15th day of the month following the month in which the service was rendered.
Based on EU-legislation, a VAT invoice needs to meet several requirements. And should the invoices not meet these requirements, the customer will not be entitled to a VAT deduction:
Include these details to ensure that the VAT can be deducted:
- Your VAT identification number
- The VAT amount
- The Invoice date
- The Invoice number
- Your company name and address
- Your Business Register Numbers [in the Netherlands: KvK / Chamber of Commerce reg. no.];
- Your customer’s name and address of your customer
- Which goods or services were supplied
- The quantity of these goods or services, and;
- When they were supplied.
Step 3: Consider how to Charge the VAT based on the Place of Supply – Especially when Doing Business Abroad.
If the ‘place of supply’ on your B2B sale lies in the Netherlands, invoicing should be simple enough and the Dutch VAT Charge applies. But if the place of supply for VAT purposes is located outside of the Netherlands [ref. Step 1], there are additional location-considerations to take into account.
B2B and B2C services | Place of Supply of Services in the Netherlands
If you established that the place of supply of services lies in the Netherlands and your customer is a private individual (regardless of the country where the customer resides), you need to charge Dutch VAT at the applicable rate.
B2B services | Place of Supply of Services in other EU-Member state
If the place of supply of services is in another EU-Member state and your customer is a VAT registered business in this same EU Member state, you are allowed to ‘reverse charge’ the VAT due to your customer. If you are reverse charging VAT to your customer, you need to include the details mentioned above together with the VAT number of your customer and the wording ‘VAT reverse charged’ on the invoice.
Link to the Dutch Tax Authorities’ page on Reverse Charging VAT: https://www.belastingdienst.nl/wps/wcm/connect/bldcontenten/belastingdienst/business/vat/vat_in_the_netherlands/calculating_vat/reverse-charging_vat
B2C Services – Place of Supply of Services in Other EU-Member State
If you established that the place of supply of services lies in another EU Member State while your customer is a private individual, you need to charge local VAT of the country where your customer resides. This would require you to register for VAT-purposes in that EU Member state.
However, to simplify this process and avoid businesses to register in various EU Member states, it is possible to register with the so-called “One Stop Shop”-portal (“OSS”) at the Dutch tax authorities. Through this portal you can account for the sales of services to all customers across the EU and pay the relevant VAT. The Dutch tax authorities will forward the VAT-payments to the relevant tax authorities in the EU.
If your sales do not exceed EUR 10.000 per year, you are allowed to charge Dutch VAT.
Check out our earlier Blog Post [in Dutch, but Google translates well!] about the One Stop Shop System:
B2B Services | Place of Supply of Services in other EU-Member State and Customer is established in yet another EU-Member state
Should you establish that the place of supply is located in another EU Member state while your customer is not established in that same EU Member State, you need to charge Local VAT [place of supply] as you can’t ‘reverse charge’ the VAT to your customer absent any VAT-presence there.
As a result, you are required to register for VAT-purposes in the EU-Member state where the place of supply of services lies.
B2B and B2C services | Place of Supply of Services in Third Country
If you established that the place of supply of services is located in a ‘Third Country’ (non-EU-Member state) you do not charge any VAT; the services are considered to have supplied ‘out of scope for VAT’ as the place of supply is located outside of the EU VAT system. So on the invoice, you don’t include VAT but you do need to include the wording ‘not liable to Dutch VAT’.
Questions or Something to Discuss? Feel free to book a call with me, it’s on the house!
Here’s my Calendly – pick a slot that fits and send me some details of your case, and we’ll figure it out!
