What is a VAT exemption?
With an exemption, you do not charge VAT on the supply or service in question. Whether that exemption applies depends on the service and the conditions. You can have taxed and exempt turnover at the same time. An industry classification or registration alone does not make all your activities exempt. Keep the substantiation and check each assignment individually.
VAT obligation
If you are liable for VAT, you charge VAT and must file a VAT return . You offset the VAT you receive against the deductible VAT paid on business expenses.
VAT rates explained
The Netherlands has three VAT rates:
- 21% standard rate
- 9% for certain goods and services, such as food and books
- 0% for designated supplies and services, for example, exports subject to conditions
With the zero rate, the supply remains taxable and VAT on associated costs may be deductible. With an exemption, that deduction is excluded in principle. With the VAT reverse-charge mechanism it is precisely the customer who accounts for the VAT; that is neither an exemption nor a zero rate.
Exempt industries and business activities
Exemptions may apply to the following activities. Always check the conditions of the service; this is not a list of professions of which all turnover is automatically exempt:
- investment gold
- collective advocacy
- composers, writers, cartoonists and journalists
- financial services and insurance
- fundraising activities
- healthcare
- youth and youth work
- games of chance
- canteens
- childcare
- delivery of movable operating assets
- lectures, excursions and guided tours
- education
- immovable assets
- postal services
- radio and television
- joint ventures (umbrella exemption)
- socio-cultural institutions
- sports organisations and sports clubs
- funeral directors
These exemptions often have additional conditions per industry. It is therefore important to know which category your service falls under.
VAT exemption in education
The type of education, implementation and agreement determine whether an exemption applies. Vocational education has additional conditions. Online education is not automatically taxable or exempt; interaction can be a condition. Non-subject-specific homework and study guidance is taxable, but under the official conditions you can opt for an exemption. Assess each assignment and read the conditions for education.
VAT exemption in healthcare
Many care services are exempt from VAT. Think of medical treatments, care consultations, psychological care, physiotherapy and nursing support. You are exempt if your services are aimed at human health and if your professional qualifications meet the accompanying requirements. Cosmetic treatments without medical necessity usually do not fall under this exemption. Assess each agreement in the case of multiple clients: medical service provision and the making available of personnel can be treated differently. A professional registration alone does not make an employment agency service exempt.
Apply for VAT exemption
An exemption for a service follows from the statutory conditions. If your registration with the Tax and Customs Administration does not match your activities, discuss this with your tax office. If a return is ready, submit it. Do not automatically fill in zero: foreign purchases or reverse-charge VAT can give rise to an obligation to file a return. Keep your records and the substantiation of the exemption. Report changes to taxed activities. See what you need to do for exempt supplies.
VAT exempt and small business scheme (KOR)
The KOR is a separate voluntary exemption with a turnover threshold of up to €20,000 and additional conditions. If you exclusively supply already exempt supplies, investigate what participation changes. In the case of mixed turnover, check which turnover counts towards the threshold. Participation excludes VAT deduction; for certain purchases a return may still be necessary.
Terms
To make use of the KOR, you must meet three conditions:
- You are a VAT entrepreneur
- Your company is based in the Netherlands
- Your qualifying turnover is a maximum of €20,000 per calendar year; please also check the other participation conditions
VAT exemption in international trade
Exemption does not mean that foreign trade is free from VAT obligations. Check goods or services, purchase or sale, and the country separately. With foreign purchases, you may need to declare Dutch VAT or pay import VAT, while you cannot deduct it due to the exempt application. Use the official tools for the transaction in question.
VAT reclaim (input tax)
First, allocate costs by use: exclusively for taxable turnover → deduction in accordance with the normal conditions; exclusively for exempt turnover → no deduction; for both → partial deduction in accordance with the applicable allocation method. Example: €210 VAT on exclusively exempt activities is not deductible. In the case of general costs with a substantiated deductible proportion of 60%, €126 of the €210 in this example is deductible. Read the official division and the terms and conditions for input VAT.
How do you put VAT exemption on your invoice?
If you issue an invoice for an exempt supply, do not charge VAT and state the applicable exemption. Do not simply write “0%”. Only refer to Section 11 of the VAT Act if that is the correct basis; the KOR is a different exemption. The statutory VAT invoicing requirement has exceptions for exempt supplies. In any case, ensure that your records clearly state what you supplied, to whom, and why the exemption applied.
