What does Dutch BTW (VAT) mean for your business?

If you are a foreign company with a Dutch branch office or subsidiary, then you also fall under the Dutch VAT regulations. The Dutch word for VAT is BTW, which is the turnover tax you charge your clients. All Dutch companies have unique VAT identification numbers. These changed for all sole proprietorships on January 1, 2020, but this doesn’t affect any other Dutch legal entities, such as BVs. If you do business in the Netherlands, you need to pay and charge VAT for nearly all services and goods, apart from a strict list of exemptions. Doing business within the European Union (EU) is generally free of VAT if your company is based in one of the EU Member States, we will outline this in detail later.

VAT is the abbreviation for 'value added tax', but for entrepreneurs, it is better known as sales tax. Like all other taxes, it is an additional source of revenue for the government of the country your business is based in and is imposed as a levy on any product or service. This ranges from a hairbrush you buy or a screwdriver in the hardware store, to having a website built and content written for the same website. In essence, this indeed means that you pay taxes not only on the money you earn, but also on what you spend.

In this article, we will provide you with a basic overview of Dutch VAT, such as the current rates, which services and goods fall under these rates, and an extensive list of exemptions. Please also keep in mind that, from July 1, 2021, new VAT rules for e-commerce will apply. So, if you are thinking about starting a Dutch e-commerce company, you can find more information about these new rules here. You can also find some interesting information about starting an e-commerce business in the Netherlands in this article.

The history of Dutch VAT

Before we start explaining how the Dutch VAT is structured and what this means concretely in terms of taxation, let’s explore the history of VAT a little bit. Paying taxes has been around for centuries, it’s definitely not a new invention. In the time of the Roman Empire, there were already four different kinds of taxes: a land tax, a cattle tax, a tax related to customs, and a tax on the profits of any profession. In these days, the latter would equal (corporate) income tax. Later, namely in the 17th and 18th centuries, taxes mainly concerned basic necessities such as firewood, soap, salt, grain, meat, peat, coal and wool. Due to the fact that no one could live without these products, the government was always assured of an income. The government used that money to protect the land and residents, maintain public order and regulate traffic, water management and trade. An interesting detail: during these times, everyone paid the same rate regardless of their income. In 1806, a system of general taxes was introduced under Alexander Gogel, who was Minister of Finance during the Batavian-French period. The significance of the system lay mainly in achieving the unity of Dutch taxation1.

The first form of tax on income was introduced in 1914. The purpose of introducing income tax was to tax according to one’s actual ability to pay, which was a new approach to taxation because, as we just mentioned, previous ways of taxing didn’t take into account how much someone earned. The history of the implementation of VAT (or sales tax) in the Netherlands dates back to 1969, when the system was introduced. The low rate at that time was 4%, and the high or normal rate was 12%. The VAT rates have changed several times over the years, with a clear upward trend. This trend can be observed worldwide. From then on, VAT in the Netherlands was levied according to the value-added tax system. Many European countries enacted VAT in the 1960s and 1970s. Other countries followed in the 1980s and thereafter. The current VAT system was introduced at the proposal of the European Union (EU). The EU wanted to introduce a European tax, and this became VAT, modeled after the French system of levying sales tax, the TVA.

The role and size of the government have only increased since then. That is why each government ‘needs’ more and more money to be able to carry out all its tasks. New tax types, such as sales tax (VAT since 1969) and corporate tax, were therefore introduced. In 1964, a payroll tax was also introduced. On October 1, 2012, the normal VAT rate in the Netherlands was increased from 19% to 21%.

Historical VAT rates in the Netherlands

Below you will find an overview of the historical VAT percentages in the Netherlands, from the moment of the introduction of the current value added tax on the basis of the European VAT guidelines in the Turnover Tax Act 1969. As you can see, the rates have steadily risen throughout the years.

Effective date                                  Low                                     High

January 1, 1969                             4%                                      12%

January 1, 1971                             4%                                      14%

January 1, 1973                             4%                                      16%

October 1, 1976                             4%                                      18%

January 1, 1984                             5%                                      19%

October 1, 1986                             6%                                      19%

January 1, 1989                             6%                                      18.5%

October 1, 1992                             6%                                      17.5%

January 1, 2001                             6%                                      19%

October 1, 2012                             6%                                      21%

January 1, 2019                             9%                                      21%

Why pay VAT as an entrepreneur?

Paying taxes is necessary because it funds the government, everyone knows this. As a natural person, you essentially pay VAT on everything you buy. But what is the difference when you are an entrepreneur? You charge VAT on top of your fees or prices to your customers. They will then pay the total amount mentioned on your invoice. You, as an entrepreneur, will have to pay that money back to the Dutch tax authorities. If you also paid VAT, then you can reclaim some of the VAT as well. But why do we pay taxes this way? Why don't the tax authorities collect it directly from your customer? Why do entrepreneurs first charge each other taxes and then have to hand these over to the tax authorities? The purpose of VAT is that the ultimate user of a product or service pays this tax. But before a product reaches the final user, there are many steps in between, you can see it as a (supply) chain. Where does VAT go? It is not always completely clear where the production chain ends. That is why everyone in that chain must pay this tax. This way, the Dutch tax authorities seem to keep control of it. Everyone simply pays sales tax, and then the tax authorities determine who is or is not entitled to a refund. This also has a practical advantage: as a VAT-registered entrepreneur, you do not have to worry about whether your customer is liable for VAT or not.

When you own a business in the Netherlands, you also have to pay VAT on your purchases. Think of office supplies, necessary stock items, a car, and various forms of equipment. You can therefore offset this input tax with the VAT that you have charged your customer. In short, VAT can actually be financially neutral for entrepreneurs, or even balance out positively if you have more costs than income. As an entrepreneur, you are a kind of conduit for the tax authorities. So the sales tax does not come from your 'own money'. It has no influence on your turnover or profit. You simply pass the VAT on to the tax authorities. Keep in mind, that this does not apply to self-employed persons who carry out work that is exempt from VAT, since they do not have to charge sales tax on their service. These are, for example, journalists, artists, funeral directors or companies that do something with sports, culture or education. We will add a comprehensive list of VAT exemptions later in this article, so you can become acquainted with all professions that charge 0% VAT. Self-employed persons in this group cannot therefore reclaim the VAT they have paid from the tax authorities. In their case, sales tax does affect profits as an additional cost. You can also be partially liable for VAT. In addition to your VAT-free work, you might also provide services or goods that have VAT added. You can then reclaim the sales tax proportionately. If you are liable for VAT on half of your activities, you can reclaim half of the tax you paid. So make sure you fall under this category as an entrepreneur to know how to handle your VAT return correctly.

The current Dutch VAT rates

In the Netherlands, there are three distinguishable VAT rates: 0%, 9%, and 21%. The highest rate of 21% is the standard rate for all products and services, which is why this is considered the general VAT rate. The 9% rate applies to certain products and services. Amongst others, these are food products, books, artistic works and certain medicines. You can find an extensive list below. The 0% VAT rate applies when your Dutch-based company does business with companies based in other EU countries and in the case of special exemptions, which we will also describe below2.

The three VAT ratesexplained in detail

21% VAT rate

The 21% tariff is generally the most commonly used tariff in the Netherlands. Most services and products fall under this category, unless there are reasons for exemptions. Another reason why a product or service might have a different tariff, is the reverse-charge mechanism when doing business with companies and people in other EU Member States. If none of these exemptions apply and your product or service does not fall under the 9% or 0% category, then you always pay or charge 21% VAT.

9% VAT rate

The 9% tariff is also known as the low VAT tariff. This tariff applies to a wide variety of goods and services that are used daily or on a regular basis, such as:

  • repairing bicycles
  • repairing shoes and leather goods
  • repairing clothing and household linen
  • hairdressing services
  • work on dwellings
  • offering camp parking
  • offering accommodation
  • granting access to cultural and recreational events and facilities
  • performance by artistic performers
  • opportunities for sports and bathing, including swimming pools and saunas
  • passenger transport
  • supplying or lending e-books
    • The 9% rate only applies if the e-book is similar to the physical edition, to which the 9% rate applies
  • granting access to news websites (such as newspapers, weekly newspapers and magazines)
    • The 9% rate does not apply if this news website consists mainly of advertising, video content or listenable music; in that case, the 21% rate applies

The 9% rate also applies to a number of services closely linked to goods covered by the 9% rate:

  • yielding goods, such as cultivation of plants and breeding of animals
  • selling food in the hospitality industry
  • renting, repairing, maintaining, adapting, fitting and preparing (medical) devices
  • lending books and periodicals
  • lending or renting out works of art by the artist himself
    • The 21% rate includes the lending or rental of works of art by others, such as art lending institutions

0% VAT rate

The 0% tariff applies to all company owners and entrepreneurs, who do business with foreign countries. It doesn’t matter whether the company owner is a foreigner or not; if the business is executed from an established branch office in the Netherlands, all its activities fall under the Dutch tax regulations. The 0% tariff mostly applies to the supply and shipping of goods from the Netherlands to other EU countries, but can also apply to certain services that are provided from the Netherlands. These can also be services that are related to cross-border transactions, for example, transportation of goods internationally or work on goods that will be exported. This tariff also applies to all international transport of travelers and passengers. An interesting note: if you apply the 0% VAT tariff, you still have the right to deduct VAT on your quarterly statement to the Dutch Tax Authorities.

Exemption from VAT

Next to the three distinct VAT rates, there are also certain businesses and business activities, as well as sectors, that are completely exempt from VAT. This means, in simple terms, that the customers of such companies and organizations do not have to pay any VAT. These businesses, activities and sectors are as follows:

  • investment gold
  • collective advocacy
  • composers, writers, cartoonists and journalists when producing their own distinctive work
  • financial services and insurance
  • fundraising activities
  • health care
  • youth work
  • gambling
  • canteens
  • childcare
  • supply of movable assets
  • lectures, excursions and guided tours
  • education
  • real estate
  • postal services
  • radio and television
  • partnerships (umbrella exemption)
  • sociocultural institutions
  • sports organizations and sports clubs
  • funeral directors

This comprehensive list can also be found on the website of the Dutch Tax Authorities.

More special exemptions

Next to the standard exemptions mentioned above, there are also a number of extra exemptions that lead to a 0% VAT rate. The most relevant are all mentioned below. If you have a business idea in any of these sectors, chances are high you don’t have to charge VAT to your customers and clients.

The healthcare sector

All medical professions and consultations that solely focus on healthcare are exempt from VAT. This exemption applies to all professions that can be categorized under the Health Care Professions Act (BIG). So this exemption applies to professions such as paramedics, therapists, doctors, surgeons, general practitioners, care homes, orthodontists and dentists. However, please keep in mind that the exemption only applies if the services offered are within the area of expertise of the professional. So a dentist cannot use the 0% rate if he or she, for example, offers psychology sessions without the proper academic degree and professional experience. This rule also stretches to third parties, as temping agencies that provide health care professionals have to charge the regular rate of 21%. The latter also applies to personnel registered in the BIG register.

Digital and online services

If you own a company that supplies digital services such as telecommunications, broadcasting, or online e-services, then the place from which you supply these determines which VAT rate applies and where it needs to be paid:

  • If it’s a Dutch customer, the appropriate VAT rate applies
  • If your customer is a company in an EU member country, then your customer will pay VAT in their own country, and you charge 0% VAT
  • If your customer is a consumer living in an EU member country, then you need to charge VAT in accordance with the regulations in the country of the consumer
  • If you have a customer in a country outside the EU, you do not pay or charge VAT

Tax-free shopping

You might be familiar with this situation at various national and international airports: tax-free shopping. This situation applies when you sell goods to non-EU residents; in that case, you do not charge VAT to your customers. In order to prove this on future declarations, you can use a copy of the sales invoice stating your customer’s credentials. A check with the customer’s name or a copy of his or her passport is also considered proof, in the case of the latter, you will need to cover the citizen service number and the customer’s photo due to privacy legislation.

Fund-raising activities

Some fund-raising activities are also exempt from VAT. This is the case if the activities are initiated for:

  • Care organizations
  • Youth organizations
  • Educational organizations
  • Collective interest organizations such as charities
  • Sports organizations
  • Social and cultural institutions

Keep in mind that there is a limit to the exact amount you can raise for such organizations. If you exceed this limit, other VAT rates may apply.

Vocational education

If you consider working in the Netherlands as an independent teacher or for a private school, there might be a possibility your services are exempt from VAT. Your services need to be within the field of vocational training, and you also need to be registered in the Central Register of Short Professional Training Courses (Centraal Register Kort Beroepsonderwijs, CRKBO).

Sports clubs

Most services that are offered by non-profit sports clubs and organizations are exempt from VAT. The services need to be closely related to physical exercise and/or the actual practice of sports. You can look on the website of the Dutch Tax Authorities for an extensive list of tax (VAT) exemptions.

Some important changes since 2021

Please note, that there were some changes in July 2021 that concern the current VAT rules. If you are an e-commerce entrepreneur, and you supply goods from outside the EU to consumers within the EU, then these rules apply to you. There used to be a VAT exemption for all imports of shipments with a maximum value of 22 euros. This exemption has expired as of July 2021. However, if it concerns shipments with a value of up to €150, for which an exemption from customs duties applies under Article 23 or 25 of Regulation (EU) 1186/2009, then you must file an import declaration in the country of destination and pay the VAT there. Unless you opt for the "import scheme," do you opt for the import scheme? Then you register in the country where you are located or in the country where your representative is located. If you use the Import Regulation, you will receive an 'import regulation number'. You use this number when you submit a declaration to customs with DECO. You can read more about this in our article about changes to Dutch import regulations for e-commerce entrepreneurs.3

Submitting your periodic VAT return

If you are a Dutch entrepreneur, then you will have to file a quarterly VAT return for your sales tax. We always advise keeping this money separate somewhere and not spending it, as it is not actually yours to spend. It’s best to have a separate account and also keep track of the money via accounting software, or by hiring a third party to whom you can outsource such administrative tasks. Many entrepreneurs hire an accountant or bookkeeper simply because they don’t have enough knowledge, time, and/or expertise to take care of all financial and tax matters on their own. Also, keep an eye on the deadlines. The tax authorities charge a fine for each tax return filed late. Even if you don't get anything back or have to pay anything, make sure you send the necessary data on time to avoid problems in the future.

Intercompany Solutions can help you with company registration and all related financial matters

If you plan to establish a company in the Netherlands, you will have to go through a lot of paperwork and separate actions in order to realize this. You will need to fulfill all information requirements for our team in order to prepare for the formation of your business. For the formation of a Dutch BV, which is the most common type in the Netherlands, the formation procedure will be as follows:

Step 1

  • We will need to confirm identity information regarding the directors and shareholders of the BV company to be established, so you will need to provide a valid form of identification for all directors, shareholders and other ultimate beneficial owners involved
  • If you are filling out our form regarding the formation of a business, please make sure you do this correctly, as this will speed up the process substantially
  • The preferred company name, since this has to be verified in advance to check availability, so make sure the name you choose is unique and not already in use. If a name is already being used, you will have to come up with a different name

Step 2

After we have prepared the initial documentation for the formation of the business, all involved shareholders will need to visit the Dutch notary public to sign the formation documents. Alternatively, it is possible for us to prepare the formation documents to be signed in your home country and send the original signed documents to our corporate address in Rotterdam, by authorizing us to go in your stead.

Step 3

Our firm will then follow the official company formation procedure in the Netherlands and file the company in the Dutch company register. You then receive your Dutch Chamber of Commerce registration number as well as your VAT number. If you need an EORI number, please let us know, as we can arrange that for you too. We can also assist with extra services, such as a bank account application, as we have several solutions regarding the application process with certain Dutch banks remotely. Our experienced team can help you during the entire process; we can handle the procedure in only a few business days. We are also always available to assist you with any financial questions or matters, such as periodic and annual tax returns, how to keep a solid administration, and secretarial support. Please contact us for more in-depth information about our services.


[1] https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/zakelijk/btw/btw_berekenen_aan_uw_klanten/btw_berekenen/btw_tarief/btw_tarief

[2] https://www.belastingdienst.nl/wps/wcm/connect/nl/douane_voor_bedrijven/content/e-commerce-kijk-wat-er-voor-de-btw-verandert-bij-uw-douanezaken

[3] https://www.rijksoverheid.nl/onderwerpen/inkomstenbelasting/voorkomen-dubbele-belasting

[4] https://www.belastingdienst.nl/wps/wcm/connect/nl/btw/btw

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