Netherlands: Proposal to extend VAT adjustment rules | KPMG | GLOBAL

Netherlands: Proposal to extend VAT adjustment rules to “expensive services”

Netherlands: Proposal to extend VAT adjustment rules

A proposal to amend the value added tax (VAT) regime would extend application of VAT to the refurbishment of real estate and other “expensive services” such as software.

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If the proposed VAT changes are finalized, it would take more time for the VAT deduction on these services to become final. Moreover, in the event of a “change of use,” the amount of VAT deducted in the past might have to be repaid. The new rules would afford the prospect for a VAT refund, however (this was initially precluded). 

Currently, “expensive services” are used over a longer period, are usually capitalized on the balance sheet, and consequently have the characteristics of a capital good. Dutch VAT rules currently include an adjustment scheme for capital goods. Based on the draft proposal, the VAT use of “expensive services” would have to be followed for an extended period from 1 January 2018. According to the proposal, “expensive services” relating to immovable property would have to be followed for 10 financial years, while “expensive services” that do not relate to such property would have to be followed for five financial years. The proposal defines “expensive services” as services that the VAT taxable person usually “writes down” for individual (personal) and corporate income tax purposes.

KPMG observation

The draft proposal could have an enormous impact on many companies and institutions, especially when there have been VAT exemptions. The administrative burden would increase because investments would have to be followed for longer periods of time.

 

Read a May 2017 report prepared by the KPMG member firm in the Netherlands

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