VAT on electronic services
VAT on electronic services within the EU
VAT on software is typically charged in the country of the Buyer, although it can be paid via the VAt return in The Netherlands.
Electronic services (such as software) are taxed in the country of the customer or user for the levy of VAT. This has been the same since 2010 with regard to electronic services to other entrepreneurs (B2B services), since 1 January 2015, this also applies if the customer is a non-entrepreneur (the B2C services). The provider must ensure, through the website on which the service is offered, the country of the customer can be unambiguously determined.
The customer is an entrepreneur
Electronic services to entrepreneurs are taxed in the country of the customer. The provider will have to be able to check whether there is an entrepreneur so that when creating an account it is for the customer must be able to identify himself with a VAT identification number or other characteristics. Also, the provider of the electronic service must realize that an invoice has been correctly drawn up should be made available online.
If a Dutch entrepreneur is involved, 21% Dutch VAT is owed (heading 1-a of the VAT declaration). There are no services (yet) that fall under the reduced VAT rate. In the other EU Member States. In certain cases, there are lower rates, such as the reduced rate for e-books. The European, The Court of Justice has ruled that this is not correct. On the other hand, the European Commission is now starting an investigation to what extent reduced rates for digital products can be introduced.
For a customer within the EU, the VAT has been transferred to the VAT identification number of the customer. The turnover must be stated in section 3-b of the VAT return and in the ICP Declaration (column services). The digital invoice should refer to the application of the reverse charge mechanism (for example, "VAT reverse charged" or "VAT reverse charged")
Finally, no VAT is due to an entrepreneur outside the EU. The turnover does not have to be in the VAT return to be declared, including not in section 3-a. This section is reserved for the export of goods to a destination outside the EU. You can indicate on the digital invoice that no VAT is due (for example, "non-VAT taxable for EU purposes" or "out of scope EU VAT").
The customer is a non-entrepreneur
If a Dutch private individual is involved, 21% Dutch VAT is due (heading 1-a of the VAT declaration). As noted above, there is not yet a reduced VAT rate on electronic services
For a customer within the EU, VAT is due in the EU Member State of the customer. The digital service provider must, therefore, determine which VAT rate applies and pay this VAT. In principle, a VAT number of the relevant EU Member State is requested and a local declaration is submitted. Paying VAT is already valid from the first euro. So there are no threshold amounts such as
under the distance selling scheme (selling goods to private persons in another EU Member State, al than via the internet). In order to prevent every provider from registering directly in all EU member states, there is an option to use the Mini-One-Stop-Shop system, MOSS for short.
Through the tax office in Heerlen can then file one tax return and all due by one payment
VAT is paid. The tax office in Heerlen ensures that the VAT amounts are paid to the correct foreign tax authority. It is important that the entrepreneur realizes that for the
MOSS declaration other deadlines apply (the declaration period is 20 days after the end of a quarter). In the case of repeated non-compliance with the MOSS obligations, the access to MOSS could be denied and the entrepreneur will still have to register in the other EU Member States.
Please note, VAT paid in the other EU Member States may not be deducted as input tax from the VAT due in the MOSS declaration. The entrepreneur will have to use the separate one for this digital refund procedure. The digital provider does not owe VAT to a non-EU customer. The turnover does not have to be in the VAT return to be declared. As noted above, not even in section 3-a of the VAT return.
YOUR BUSINESS TOOLKIT
FREE ACCESS TO ALL THE THINGS YOU NEED TO KNOW
Our experts have combined their knowledge and strengths to create a tool we call the Business Toolkit.
The Business Toolkit will help you and entrepreneurs from around the globe to truly understand the Dutch market, regulations and laws. And will enable you to take a deep-dive the many business-related topics.
Make sure to check out our handy checklists, explainer video's and extensively written Whitepapers too!