Value Added Tax (VAT, or 'btw' in Dutch) is a tax levied on your sale price as an entrepreneur. In some cases, the tax can be omitted from your sale price. However, '0% VAT and 'VAT exempt' are not the same. Pay attention to this when, for example, you are creating an invoice. It determines whether you can reclaim the VAT you paid on expenses for your business or not.
0% VAT
In some industries, as an entrepreneur you are ought to charge '0% VAT' on your sale price. This means that, in effect, no VAT is added to your sale price. However, you must still list the 0% rate on your invoice. The sale is subject to VAT, but at a 0% rate. That might sound strange, but you can only reclaim VAT on expenses incurred for VAT-taxable sales. And a sale at 0% VAT is technically subject to VAT.
This means that in practice, having to charge the 0% VAT rate is quite beneficial: you can reclaim the VAT on your expenses, but you don’t have raise your sale price with any VAT. In case all your sales are against 0% VAT, you will probably receive money back on your VAT return every filing.
Examples
Examples of when you must charge 0% VAT:
Sale of goods or services to a foreign company within the EU (intra-community supply/service);
Export of goods outside the EU or performing services related to this;
Transfer of goods to a customs warehouse;
Providing services at airports;
the supply and installation of solar panels.
How to list 0% VAT on an invoice?
(Do not forget in this case to also meet other invoice requirements, such as mentioning the foreign VAT number of the customer)
VAT exempt
There are quite some industries that are 'VAT exempt'. If you provide a service or good in such a sector, you do not need to charge VAT and you should state 'VAT exempt' on your invoice. Just like with the 0% rate, your sale price is not increased by VAT. However, if your sale is VAT exempt, you cannot reclaim the VAT you have paid on your expenses.
Some of the industries in which sales are VAT exempt are:
Healthcare;
Financial sector;
Real estate;
Education;
Sports.
Note: there are many exceptions within these industries. So make sure to thoroughly check if the VAT exemption also applies to you if you are working in one of these sectors.
How to list VAT exempt on an invoice?
Difference
As you can see, on the invoice with 'VAT exempt', an entire column is omitted. No VAT calculation needs to take place. For a VAT exempt sale, you are not even obligated to issue an invoice (although your customer will likely want one).
In many accounting programs, this goes wrong. The 'VAT' or 'Rate' column remains, showing 0% for the exempt sale. This is incorrect. If your accounting or invoicing program cannot correctly display your exempt sale when you try to indicate this (for example, on e-boekhouden.nl), you can try changing your invoice template.
As you can also see, in both cases, you must refer to the particular VAT treatment of the sale. In fact, in all cases where you do not use the 21% or 9% rate, you must mention somewhere on the invoice why that is the case.
Mixed sales
You can deduct VAT on expenses insofar you use these expenses to make VAT taxable sales. Some entrepreneurs make both sales on which VAT is levied and VAT exempt sales. For them, it is necessary to determine whether their expenses are related to a VAT exempt sale, a VAT-taxable sale, or their general business operations. In the latter two cases, VAT deduction is still (partially) possible. Feel free to contact us if you would like to discuss this further.
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