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VAT Rate Set to Increase
On 11 July 2012 the Dutch Senate adopted the VAT increase which will be introduced on 1 October 2012. The standard VAT rate will increase from 19% to 21% with effect from 1 October 2012. On the basis of questions and answers set out in our newsletter of 3 May 2012 we outlined the changes that you, should take into account when the VAT increase enters into force. Taxand Netherlands sets out a brief explanation of the substance of the transitional regime.
Time of chargeability and applicable rate
With respect to supplies or services, the time that these are carried out is the determining factor for application of the old (19%) or the new (21%) rate. If the supplies or services are carried out before 1 October 2012, the old rate of 19% is applicable. If an invoice is sent out after 30 September 2012 for supplies or services carried out prior to 1 October 2012, the rate of 19% is applicable. For supplies and services carried out after 1 October 2012, the new VAT rate of 21% must be applied.
The time that the supply or service is carried out is also determinative for applying the rate to ongoing services. Consequently, ongoing supplies or services which commenced prior to 1 October 2012 and continue after 30 September 2012 will be taxed with two different rates. The new rate of 21% only applies to that part of the supplies or services carried out on or after 1 October 2012. Examples of ongoing services are: the granting of licences, subscriptions for the supply of gas, electricity and water; telecommunication services and possible other long-term advice contracts.
Taxand Netherlands discusses the substance of the transitional regime in greater detail
Application of the rate increase cannot be avoided by advance billing or advance payment. If partial or full advance payment/advance billing takes place and 19% VAT is charged whilst the supply or service was carried out on or after 1 October 2012, the VAT rate of 21% still applies. The current transitional regime states that you then owe the 2% extra VAT with effect from 1 October 2012 and that a correction must then be effected for the relevant part.
In 2001 express approval was granted to charge the new rate on the invoice with respect to advance payments or advance billing. There is no specific reference in this respect under the current transitional regime. Nonetheless, it seems that the transitional regime allows room for this because a correction is only stipulated if the old standard rate is charged.
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