Outline of VAT, excise tax and consumption tax measures
2018 Tax Plan - Budget Day (Prinsjesdag)
The following lists the measures proposed in the 2018 Tax Plan in respect of VAT, excise taxes and consumption taxes.
30 November 2017
- Stricter definition of medicines
- Change in rate setting for seagoing vessels
- Abolition of agricultural scheme
- Liability for pledgees, mortgage holders and executors
- Investigative authority for excise duties
Stricter definition of medicines
From 17 July through 14 August 2017, the Dutch Ministry of Finance organised an Internet consultation on the stricter definition of medicines for the application of the reduced VAT. The 2018 Tax Plan includes this stricter definition of medicines without any changes.
The stricter rules as from 1 January 2018 imply that the reduced VAT of 6% will only apply to products for which a (parallel) trade licence has been issued as referred to in the Dutch Medicines Act or if they are explicitly exempt from such a licence. As from the abovementioned date, the reduced VAT rate will no longer apply to products which may evidently not be traded as medicines under the Dutch Medicines Act and EU regulations for cosmetics, medicines and medical appliances.
Change in rate setting for seagoing vessels
The VAT Directive obliges EU Member States to apply the zero rate for the supply of vessels that are used on the open seas for passenger transport against payment, freight transport, fishery and such. The exemption also applies to the provision of supplies to such vessels as well as to a large number of services relating to those vessels and the objects that are permanently attached to them or serve their operation.
The European Commission argues that application of the zero rate in the Netherlands is too broad since the current formulation links the zero rate to seagoing vessels as such, without requiring them to be effectively used for navigation on the open seas. The looming threat of infringement proceedings prompted the legislature to propose a restriction of the zero rate, applicable to seagoing vessels designated to navigate the high seas for 90% or more. However, on the back of criticism from the House of Representatives a memorandum of amendment has been adopted, reducing this rate to 70%. What’s more, the House of Representatives has adopted an amendment according to which the restriction of the zero rate will become effective a year later (on 1 January 2019). In exchange for this the tobacco excise duty will be raised in 2018, to a higher level than had initially been anticipated.
Abolition of agricultural scheme
As announced on 2016 Budget Day, the VAT agricultural scheme will be cancelled on 1 January 2018. This scheme exempts farmers and other agriculturalists from VAT, while they are not allowed to deduct VAT charged on costs they have incurred. Entrepreneurs can opt to apply the regular VAT rules. Since a decreasing number of companies uses the agricultural scheme, it will now be cancelled.
Following cancellation of the agricultural scheme, application of the reduced rate to several goods and services supplied to will be abolished too. Agriculturalists who currently use the agricultural scheme will be faced with a transition, as a result of which they will have to revise the VAT on investments made prior to 1 January 2018. This will lead to a refund of a part of the VAT that was not deducted before 1 January 2018. This revision normally takes place over a number of years (depending on the date when they first entered into service), but transitional provisions now permit this revision to be effected in one go. For investments acquired but not yet entered into service before 1 January 2018, an input tax credit arises for the full VAT amount in 2018.
Liability for pledgees, mortgage holders and executors
When pledgees, mortgage holders or executors sell goods on behalf of the owners, they can also recover the VAT proceeds. In an effort to prevent the government from missing out on VAT revenues for an even longer period, a joint and several liability for pledgees, mortgage holders and executors will be implemented on 1 January 2018. A reverse-charge mechanism already applies to guarantee collection of VAT on sale of immovable property in such cases. The liability applies in those cases where the reverse-charge mechanism does not apply, for instance when the purchaser is not an entrepreneur for VAT purposes or when it involves an item of movable property. However, the House of Representatives has adopted an amendment, stipulating that shareholders, mortgage holders and executors will only be liable if they could have known that the tax debtor would fail to pay the VAT due.
Investigative authority for excise duties
Under current legislation, the Tax Inspector can only investigate excise warehouses and places that are subject to restrictive provisions for the levy of excises. It is now proposed to extend this investigative authority to all buildings, excluding houses, and all land to which access is to be granted under the Dutch State Taxes Act.
Deloitte Update Cafés
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