As of 1 January 2019 the reduced rate for VAT is to be increased from 6% to 9%. This change in rate will mean extra costs for some businesses and an additional administrative burden for almost all of them. A business applying the reduced VAT rate on supplies of goods and services will have to prepare for the change. The rate change will require internal changes (the administrative system) and external adjustments (for example the pricing of services and products).
The Government confirms its intention for a smooth transition. The Dutch Tax Authorities will refrain from raising additional VAT assessments in certain situations. For example, if an entrepreneur receives a payment in 2018 for supplies, which will be effected in 2019, the current lower VAT rate of 6% is applicable.
What does it mean for your administrative system?
A business applying the reduced VAT rate will have to prepare for the change in rate. For example, new tax codes for ‘9% VAT receivable and payable’’ will have to be generated in the administrative system, while the old tax codes for 6% will still have to be kept alive as well.
Furthermore, decision trees within the ERP system, interfaces with external systems and internal manuals may have to be updated. Since numerous internal procedures have to be followed and tests have to be performed before the new tax code can be accepted, we recommend to start preparing your administrative systems well in advance. Moreover, contracts with customers may have to be reviewed.
Smooth practical transition intended
The government wants the transition to take place smoothly and businesses should not get bogged down in complicated transition-related problems when invoicing or receiving payment in 2018 for activities which are taking place in 2019.
For VAT taxable persons applying the ‘VAT cash receipts system’ (kasstelsel: ‘paying VAT upon actual receipts instead of VAT liability arising from invoice date’) this transitory problem obviously will not exist. Their challenge is to be able to pay the correct amount of 9% VAT with respect to their January 2019 ‘received turnover’.
Examples of advance payments referred to by the State Secretary include tickets for concerts and sports events which are only taking place in 2019, but which are already being paid for this year. Another example he mentioned is the contract for the plastering and painting of ‘old’ dwellings (i.e. dwellings more than two years after the point in time when first taken into use).
No transitional measures
The proposal does not include any transitional measures. Only for books, having a fixed price by law, a transitory measure is published.