VAT Liabilities for thE
VAT Liabilities for the Dutch Foundation : NGO’s and charities
The Value Added Tax in the European Union applies to all goods and services that are bought and sold for use or consumption in the European Union. Thus, goods which are sold for export or services which are sold to customers outside the EU are normally not subject to VAT.
A taxable person, any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity, is liable for VAT on his or her turnover (the output tax), from which the VAT charged on expenses and investments (the input tax) may be deducted. If the balance is positive, tax must be paid to the tax authorities. If the balance is negative, a refund is received.
As mentioned in our article on the corporate tax treatment of Dutch charities, the Dutch Foundation would have a tax-free status for corporate taxes, by default. Even if it does not apply for the ANBI status.
However, if commercial services/goods are provided to customers/partners, you need to consider the VAT (Value Added Tax) liabilities. This would also apply if ANBI status is granted.
It is common for foundations and associations to sell goods and services in order to raise funds to finance their activities. Generally, this fundraising takes place in economic transactions and can therefore result in the levying of VAT. There is a fundraising exemption, but it only applies to specifically designated main activities.
The standard VAT rate in the Netherlands is 21%. A reduced rate of 9% or 0% will apply on the sale of certain goods or the supply of certain services.
Dutch Foundations (even when granted the ANBI) can be liable for VAT in The Netherlands, in case of the following activities:
Advertisement in the catalogues/websites/platforms;
Sale of goods or services;
Organization of events (entrance tickets, etc.)
This is not an exhaustive list.
Once the formation of the Foundation is started, it does not have to register for VAT instantly. This can be postponed, until the Foundation would actually deliver services in The Netherlands, or in other EU countries. (for the first 20K in turnover, an exemption applies. (The KOR-scheme).
The general rule for the sales of goods/services to Dutch customers is that these will be taxed against the standard rate of 21%. The Dutch Foundation/Association will issue an invoice with Dutch VAT. The Dutch customer will be able to deduct this VAT.
A Dutch Foundation/NGO could consider the following two scenarios within the EU:
1. Services supplied to EU customers who are registered for VAT purposes
Because, according to the VAT act, the place of supply of services to other customers registered for VAT purposes is the member state of that customer, the Dutch Foundation should reverse charge the VAT to its customer. This system applies because the Dutch Foundation/Association is not registered in that other country, and is therefore not able to charge that foreign VAT. The foreign EU customer will declare the VAT in its VAT return (and is able to deduct it in the same VAT return).
2. Services supplied to EU customers who are NOT registered for VAT purposes
However, customers who are not registered for VAT purposes and do not have an active VAT identification number are considered regular consumers. According to the VAT act, the place of supply of services provided to these customers is the Netherlands. As a result, your Foundation needs to charge 21% Dutch VAT on these services. Unfortunately, there is no way around this; there are no other place of supply rules for corporate entities (or associations) without a VAT number, so Dutch VAT is due.
If a member is located outside the European Union, the place of the supply of service will be that non-European country. Based on that fact, the supply of service is out of scope for European VAT. ISSA will issue an invoice without Dutch VAT. On the invoice, The Dutch Foundation should mention that the supply of service is ‘out of scope of VAT.
The following information is required in each VAT invoice:
Date of issue;
Unique sequential number identifying the invoice;
Customer’s VAT identification number (if the customer is liable for the tax on the transaction);
Supplier’s full name & address;
Customer’s full name & address (no PO box);
Description of quantity & type of goods supplied or type & extent of services rendered;
Date of transaction or payment (if different from invoice date);
VAT rate applied;
VAT amount payable;
Breakdown of VAT amount payable by VAT rate or exemption;
Unit price of goods or services – exclusive of tax, discounts or rebates (unless included in the unit price).
Extra information required in some cases:
Exempt transactions – a reference to the appropriate (EU or national) legislation. exempting it, or any other reference indicating it is exempt (at the choice of the supplier).
Customer liable for the tax (i.e. under the reverse-charge procedure) – the words ‘Revers charge’.
Supply of service to a Non-EU taxable person – the words ‘out of scope for VAT’.
Intra-community supply of goods – a reference to 'article 138(1), Directive 2006/112'.
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