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VAT And Cross-Border Working
VAT levy might not be the first thing that comes to mind when thinking about cross-border working. Nevertheless, specific VAT issues may arise as soon as staff of a Dutch company start performing activities abroad. In this article we discuss a few practical examples. Below we will give an example of a Dutch entrepreneur who performs taxed services.
VAT EXAMPLES
Installation supplies VAT abroad
Example:
If a Dutch company sells goods to other entrepreneurs and ships the goods from the Netherlands to a destination outside the Netherlands, often only the zero VAT rate is considered. This is possible if the transport of the goods to the destination can be substantiated with customs and/or transport documents, for example. If the goods remain within the EU, the buyer must also provide a valid VAT identification number to be able to apply the zero rate.
Normally, by applying the zero rate in the destination country, the seller has no further VAT obligations. However, this can change as soon as the goods sold must be installed or assembled in the destination country by own personnel who stay in the country of installation for one or more days.
The fact that the transaction involves not only the sale of goods but also has a service component means that the VAT may be different. Such an installation or assembly supply is then no longer a transaction to which the zero VAT rate applies but is a supply subject to taxation in the country of installation/assembly.
This means that the Dutch seller is dependent on local regulations as to how VAT is levied.
Many EU member states have a reverse charge mechanism: the VAT on the installation delivery is then transferred to the buyer. The Dutch seller is still not required to charge VAT or register for VAT in that country. However, this is different if the buyer is not established in the destination country, in which case there is usually no reverse charge mechanism: local VAT must be charged and remitted via a local registration. Such a registration usually takes a few months to realize.