Dutch government is preparing a new regulation that will increase the low VAT tariff from 6 to 9%. This regulation will probably come into effect on 1 January 2019. Does your business provide services or products within the low VAT tariff bracket? You can prepare for the change.
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The 9% VAT tariff has yet to be approved
On Prinsjesdag, 18 September 2018, the Rutte III cabinet announced its intention to increase the low VAT tariff from 6 to 9%. The proposal still has to be approved by both Houses of Parliament. This means there is a chance that there will be no raise, or that it comes into effect at a later date than the proposed 1 January 2019.
Do not wait for approval of the plan
It is preferable not to wait for the plan to be approved (as approval is highly likely). You can prepare for this tax increase, and be ready in time for it to come into effect.
VAT raise only applies to services and products in the 6% bracketCertain services, provided by for example bicycle repair men, hairdressers and tailors, are in the low VAT bracket. Check to see if your services are in the low VAT bracket (only available in Dutch). The low VAT tariff also applies to certain products, for instance food, books and medicines. Check to see if your products are in the low VAT bracket (only available in Dutch).
Increase the VAT to 9% on quotations and invoices
For purposes of clarity, this article assumes that the increase of the low VAT tariff will come into effect on 1 January 2019. If it comes into effect at a later date, the following information has to be adjusted to that later date as well. Depending on when you will be paid, your quotations may have to contain the new low VAT tariff of 9%. There are three possible scenario’s:
- You will be paid in 2019 You issue a quotation for products or services to be delivered, and paid, in 2019. Your quotation must include the 9% VAT tariff, as must the invoice you issue afterwards.
- You will be paid in 2018 You issue a quotation now. You will perform the work in 2018 or 2019. You will be paid in 2018. You include 6% VAT on your quotation and invoice. This applies to all services that are paid for in 2018 and which are in the low VAT bracket, for instance concerts or sporting events taking place in 2019, but also paint jobs or construction or maintenance work to houses that are older than 2 years. The Tax Administration will not charge a supplementary taxation.
- You don’t know when you will be paid yet If you issue a quotation now for work to be performed in 2019, and you don’t know when your customer will pay, include 6% VAT on the quotation. You can agree with the customer, either in your written agreement or in your general terms and conditions, that you will increase the VAT to 9% on the invoice, if he intends to pay in 2019.
You pay 9% VAT from 1 January 2019
In your VAT return for the first quarter of 2019, you will have to use the new 9% tariff. This also means that you will have to charge your customers 9%, if you previously charged them 6%. Consider if, and how, the change will affect your pricing effective 1 January 2019.
Think about increasing your prices
Your private customers pay a price that includes VAT. You can calculate the VAT increase in your sales price, and maintain your gross profit. Or, you can keep the prices at the same level – but then your profit will go down. If you increase the sales price including VAT, your business customers will pay more too. Since most entrepreneurs can deduct VAT, they will effectively pay the same price for your services or products.
Find out how to adjust your point-of-sale system and other software
You’ll need to adjust the VAT tariff from 6 to 9% everywhere you currently use it: in your cash register or point-of-sale system, your accounting software, your VAT records. Check if you are able to make the adjustments yourself, or if you require the services of your supplier.