VAT reverse charge rule for telecommunication services as of 2 June 2017
On 1 June 2017 the State Secretary of Finance (“Secretary”) published a decree to allow taxable persons to immediately apply a VAT reverse charge rule for telecommunication services between taxable persons (B2B) in the Netherlands. This decree has been issued in anticipation of the expected change in legislation.
1 June 2017
VAT carousel fraud
The decree follows an earlier announcement by the Secretary in which he informed the Dutch parliament of his intention to introduce an obligatory VAT reverse charge rule for telecommunication services.
The reason for the change in legislation is due to recently detected VAT carousel fraud. As a result of this fraud the Inspector may refuse entitlement to the right to deduct input VAT where it is ascertained, having regard to objective factors, that a taxable person knew or should have known that, by his purchase, he was participating in a transaction connected with VAT carousel fraud. This leads to uncertainty among taxable persons, who purchase telecommunications services, about the right to deduct the input VAT charged to them, which could seriously impede the conduct of regular transactions in these services.
In order to remove these uncertainties from taxable persons who purchase telecommunication services the Secretary approves that taxable persons immediately apply the VAT reverse charge rule for telecommunication services.
The VAT reverse charge rule is only applicable to transactions between taxable persons who (also) supply telecommunication services. The supply of services to end-users falls outside the scope of this arrangement.
In this context, end-users are understood to be not only private individuals but also entrepreneurs who purchase such services to use them within their own organisation.
The reverse charge rule can be applied on the first invoice or on a payment prior to issuing an invoice as of 2 June 2017. Furthermore, the reverse charge rule can also be applied to telecommunication services that have been supplied before 2 June 2017 but for which invoicing will take place after this date.
The approval has been issued in anticipation of the expected change in legislation later this year, which will introduce an obligatory VAT reverse charge rule for telecommunication services. We will of course continue to keep you updated.