Netherlands: VAT, energy tax refunds in instances of “bad debts”

Netherlands: VAT, energy tax refunds, “bad debts”

There is a pending bill that would simplify the refund process for value added tax (VAT) and energy tax in instances when the invoice for payment—the invoice that includes VAT or energy tax—will not be paid (that is, the invoice will represent a “bad debt”).

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When a provider sends an invoice to customers, the amount of VAT on the invoice must be paid to the Dutch tax authorities. If, at a later stage, it appears that the invoiced amount was not received, either in full or in part, and that it will never be received, the VAT paid can be reclaimed from the tax authorities. Under current law, VAT can only be reclaimed if the receivable, in full or in part, is irrecoverable. In practice, this results in controversies with the Dutch tax authorities. Requests for the refund of VAT must be filed separately, and the VAT cannot be reclaimed via the “regular” VAT returns. 

Proposals for simplifying the VAT recovery rules

The government intends to simplify the VAT refund rules, as well as the rules for the refund of energy tax in the case of bad debts. The changes would be effective 1 January 2017, and with regard to current receivables, a one-year measuring period would begin 1 January 2017 by virtue of transitional rules.

The government has set 14 August 2016 as the deadline for providing comments on the new bill. 

KPMG observation

Although the bill is primarily a response to a desire to simplify the refund of VAT in instances of bad debts, it would also apply if full or partial payment does not take place due to the cancellation, termination or rescinding of a contract or agreement. The proposed changes could affect the manner in which companies’ administrative processes are set up. It is therefore prudent to consider taking certain steps in anticipation of the proposed legislation.


Read a July 2016 report prepared by the KPMG member firm in the Netherlands: Bill on the simplification of the refund of VAT and energy tax in the case of bad debts

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