Is my company considered ‘tax resident’ in the Netherlands for VAT purposes?
When you incorporate a company in The Netherlands, it’s considered a ‘Dutch’ company based on Company Law. However, based on Tax Law stipulations, you ‘Dutch’ company might not be considered a resident company. This can affect your tax status, and it’s important for you to understand how to determine if your company is considered a ‘resident company’, or a ‘non-resident’ company. This article aims at the ‘residence’ definition for VAT purposes. Please note that for Corporate Tax, other stipulations might be applicable.
To determine if a Dutch company is even liable for VAT it is important that an entrepreneur is established in the Netherlands or has a permanent establishment here. But when is a company based here? Which factors play a role?
Board members/Partners live abroad
In numerous court cases, it has been discussed, that the seat of business operations determines the location of a business. The seat of business operations can be decided based on the country of residence of the board members, who take the business decisions on a daily basis. In case of a General Partnership (VOF) it could be claimed that the country of residence of the Partners is decisive unless the Partnership is effectively being managed from the Netherlands.
Main factors regarding seat location
According to earlier European case law, various factors must be taken into account when determining the tax residency of a corporate entity. The most important is the registered office, the place of the central management, the place where the directors of the company meet and the place where the general policy of a company is determined.
In practice, we have also experienced that for VAT purposes it can be relevant if the company performs any activities in the Netherlands, like if it deals with Dutch suppliers or buyers.
Furthermore, in case the company has no fully-fledged office or warehouse facility, this might create the assumption that the company is not effectively operational in the Netherlands. Although the use of a ‘registered office’ is legally allowed, for tax purposes it can have its restrictions, although that will depend on the whole situation of the company. Technically it is possible to be considered a tax resident in the Netherlands, while there is no fully-fledged office in place, for example when the company works with third parties, such as a warehousing or logistics provider.
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