As of 1 January 2010, rules on VAT will change in a number of important ways. The Lower House is currently dealing with a bill for implementing new European rules in Dutch law. This so-called VAT package concerns changes relating to the place of supply of services, the procedure for VAT refunds to businesses established in other EU Member States, and the obligation to issue regular specifications of services provided to foreign customers (the ‘listing’).

It is our pleasure to inform you on the developments regarding implementation of the VAT package through regular updates. This is the first update, in the light of the State Secretary of Finance’s recent response to questions posed by the Lower House and various interested organisations concerning the bill.

• The new basic rule in business-to-business (B2B) situations is that services are taxed at the customers’ end, in their country of residence. For a service provider, it is therefore important to establish whether your customer is acting as a business. If your customer has a VAT identification number (VAT ID), you can check this with the Tax Authorities, either by writing to them or by telephone, or you can visit the European website http://ec.europa.eu/taxation_customs/vies/vieshome.do. If they do not have a VAT ID, you can use a statement from the Tax Authorities belonging to the customer’s EU Member State to demonstrate that the customer is a business. The burden of proof in cases where businesses are based outside the EU has so far not (yet) been clarified.
• If the customer acts as a private person rather than as a business, they must make this clear to the service provider.
• Despite complaints from practitioners in this area, the State Secretary is insisting on the rule that VAT due on the basis of the reverse-charge mechanism on services purchased abroad is due at the time that the service was completed rather than at the time that the invoice was issued. This new rule is important given the question on which VAT return the customer should indicate the VAT due and in which listing the service provider should specify its service. In some cases, this can occur a month earlier than the month in which you received the invoice because the services purchased from a customer abroad may be completed in the month preceding that in which you received the invoice. Since the service provider is bound by the same obligation, the dates must match. We are expecting several problems to arise from this because both service providers and customers are accustomed to using invoice dates. Further questions concerning this point are being put to the State Secretary. 
• If a service provider does not issue an invoice on time, the service provider and customer have to communicate about the tax due some other way. 
• The new rules do not apply to those services invoiced in 2010, or later, that were already provided in 2009.  
• In your VAT return, you must add the total amount for the services for which VAT is reverse-charged to your customer, or to you as a customer, to the intra-Community supplies in section 3b or the intra-Community acquisitions in section 4b, respectively. 
• If a VAT group submits a consolidated VAT return, it must also submit a consolidated listing for services that were reverse-charged. If members of a VAT group submit VAT returns separately, they must also submit a listing for reverse-charged services separately. 
• For the listing, it is important to find out whether reversed-charged services are exempt from tax in particular EU Member States and therefore do not have to be included in the listing.
• The Tax Authorities can impose a fine for failure to comply if they receive an incorrect listing. Under the current rules, the fine can amount to a maximum of EUR 4.537 per listing. 
• You must submit requests for a VAT refund in other EU Member States to the Dutch Tax Authorities using their existing website facilities, such as the protected domain part for businesses, or by using commercial software. 
• In the course of this year, the European VAT Committee will provide further guidelines concerning the interpretation of particular regulations that are important in the new rules, such as the difference between short-term and long-term hire of transport, the notion of fixed establishments and so on.

The points mentioned above are derived from the State Secretary of Finance’s responses. We expect additional questions from various (professional) organisations and from the Lower House in the near future. As soon as there is any news, we will update you. For more information, please contact the VAT and Customs practice group.