A final value added tax (VAT) return for 2017 may require a correction in light of the VAT “deduction exclusion decree.”
The VAT deduction exclusion decree precludes the recovery of VAT (also referred to as input VAT) on promotional gifts and employee or staff benefits if the gifts or benefits were provided “free of charge” or at below cost by the business or employer. It is irrelevant whether a business had a commercial reason for providing the gifts, or employee or staff benefits. The rationale for not allowing input VAT to be recovered is based on the fact that these costs—while business-related—are consumption-oriented, and VAT is specifically designed for tax consumption.
It is not necessary to make a VAT deduction exclusion decree adjustment if the total purchase and development costs (the cost price) of the benefits are less than €227 (excluding VAT) per recipient, per year. If the €227 threshold is exceeded, the input VAT on the threshold amount is non-recoverable.
The private use of company cars made available to employees is regarded as a service provided to the employee by the employer. The employer is to remit VAT on this service in the final VAT return for the financial year, in most cases this is the December VAT return or the fourth quarter return.
Read a December 2017 report prepared by the KPMG member firm in the Netherlands
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