VAT for starters — calmly explained.
Your first invoice is a small celebration — until you remember that VAT has to go on it. Which rate? When is the return due? And what may you actually reclaim? This guide explains the basics in plain language, so that VAT becomes what it is meant to be: adding up, subtracting and passing it on in time.
What VAT actually is
VAT — in Dutch belasting over de toegevoegde waarde, and on your return it goes by the name omzetbelasting (turnover tax) — is a tax you collect on behalf of the Dutch tax authority (Belastingdienst). You add it to your selling price, your customer pays it to you, and you remit it periodically. So it is not a cost to your business, and not extra profit either: it is money that is only lodging with you.
Realising that saves both stress and money. Set the VAT you receive aside straight away and the return is never a nasty surprise, just a sum you already knew. How to build that setting-aside into a simple weekly rhythm is covered in Setting up your books as a freelancer.
The rates: 21%, 9%, 0% and exempt
The Netherlands has two VAT rates, a zero rate and a group of exempt services. Which rate applies to your work depends on what you supply — not on how big you are.
| Rate | When |
|---|---|
| 21% · standard | Most products and services — from consultancy to web design. If you are in doubt, it is almost always this rate. |
| 9% · reduced | Food, books, medicines, the hairdresser and bicycle repairs, among others. |
| 0% · zero rate | Mainly supplies going abroad: exports and business-to-business supplies within the EU. You charge no VAT, but you do keep the right to deduct input VAT. |
| Exempt | Healthcare, education, insurance and most financial services, among others. No VAT charged — but no input VAT reclaimed either. |
Mind the difference between 0% and exempt: they look alike, but under the zero rate you may still deduct the VAT on your purchases and under an exemption you may not. Which rules apply to your particular trade you will find at the Belastingdienst — always check the applicable rate there before you send your first invoice.
when in doubt: 21% — otherwise just look it up
Your filing period: usually quarterly
Most business owners file a VAT return (btw-aangifte) four times a year — once per quarter, in other words. Which period applies to you is something the Belastingdienst tells you as soon as you receive your VAT identification number (btw-id); monthly and annual periods also occur. Both the return and the payment have to be in before the end of the month following the period.
Two things that often catch starters out: you file even when there is nothing to report (a so-called nil return, nihilaangifte), and the deadline applies to paying, not only to sending. Put the dates in your calendar and you need never think about them again.
Input VAT: the VAT you get back
This is where VAT suddenly becomes rather pleasant. The VAT that suppliers charge you — on your laptop, your software, your workspace — is called input VAT (voorbelasting), and you may deduct it from the VAT you have to remit yourself. On balance you only pay VAT on the value you added. Hence the name.
Two conditions: it has to be a business expense, and you have to be able to show a valid invoice or receipt. If you use something partly privately, you deduct only the business share. And if your input VAT in a period is higher than the VAT on your turnover — after a large investment, for instance — you get the difference back.
Curious how a VAT amount like that ends up as a receivable in your books? The journal entry, explained shows it line by line — to the cent.
What has to be on your invoice
An invoice only counts as an invoice once the Belastingdienst sees it that way. The essentials:
- your name and address, and your customer's;
- your VAT identification number (btw-id) and your Chamber of Commerce number (KvK-nummer);
- a unique, sequential invoice number;
- the invoice date and the date on which you supplied;
- a clear description of what you supplied, and how much;
- the amount excluding VAT, broken down per rate;
- the VAT rate and the VAT amount itself.
For small amounts there is a simplified invoice with fewer mandatory elements — the current threshold and conditions are set out by the Belastingdienst. Rule of thumb: better one line too many on your invoice than one too few.
The KOR, in plain language
The small-business scheme (kleineondernemersregeling, KOR) is a choice, not an obligation: if your annual turnover stays below the current threshold, you can apply for an exemption from VAT. You then no longer charge VAT to your customers and, as a rule, no longer file returns. Sounds delightful — but there is a flip side to it: you may no longer reclaim any input VAT either.
That is why the KOR works out well mainly if you supply private individuals and buy in little: your price effectively drops or your margin rises. If you supply businesses (which deduct the VAT anyway) or you are about to invest heavily, the KOR usually leaves you worse off. One more thing worth knowing: you are not choosing just for the moment — participation comes with conditions and time limits. The current threshold and rules are at the Belastingdienst; if you are in doubt, put your situation to your adviser first.
Reverse-charged VAT, very briefly
Sometimes you will see "btw verlegd" (VAT reverse-charged) on an invoice. The VAT is then remitted not by the seller but by the buyer — this happens with subcontracting in construction, with hiring out staff and with many business transactions abroad, among others. If you reverse-charge the VAT, you put "btw verlegd" plus your customer's VAT identification number on the invoice and charge no VAT yourself. If VAT is reverse-charged to you, you declare it in your own return — and in that same return you usually deduct it again as input VAT. It sounds weightier than it is, but it is precise work: the return has its own boxes for it.
VAT is not a fine and not a surprise — it is the tax authority's money lodging with you for a while. Keep track of it as it happens and the return takes you a quarter of an hour.
How Solvo prepares this for you
This guide is general explanation, not tax advice. For your own situation the Belastingdienst and your own adviser are the sources to turn to.