Clarification: reporting obligation VAT exemption

01/08/22

The Dutch Tax Authorities (DTA) have clarified the scope of application of the new reporting obligation. It was previously unclear whether taxpayers also had to provide data of entrepreneurs who are exempt from Value Added Tax (VAT). The latter will especially be the case if you are active in the public sector. The DTA have now clarified that the data of VAT-exempt entrepreneurs must also be submitted under the new reporting obligation.

The reporting obligation as of 1 January 2022

If you are a withholding agent for payroll taxes and you pay a natural person (not being your employee) for certain activities or services, it is possible that you are required to provide certain information to the DTA. As of 1 January 2022, a new reporting obligation has entered into force. Based on this obligation, you must then report the following information to the DTA: the social security number, name, date of birth and address details, and the amounts paid by you to the person who performed the work during the past calendar year. For more information, please contact your PwC advisor.

Exceptions to the obligation to provide information

There are exceptions regarding payments for certain activities and services. For withholding agents for payroll taxes this concerns:

the activities and services performed as an employee, artist, professional sportsman or member of a foreign company as referred to in the Wet op de loonbelasting 1964, or as a resident of another country who, in the capacity of artist, professional sportsman or member of a company, is not liable to tax in the Netherlands;
the work performed as a volunteer as referred to in the Wet op de loonbelasting 1964; and
the activities and services for which an invoice has been issued as referred to in the Wet op de omzetbelasting 1968 on which the VAT has been mentioned.

This last exception has been the subject of much debate. If you hire someone, that person will generally qualify as an entrepreneur for the purposes of VAT. Depending on the services that the individual performs, he/she is required to issue an invoice. If the individual performs VAT-exempt services - which is the case in health care and education, for example - he or she has the option to issue an invoice. If the individual issues an invoice, it must in that case state that a VAT exemption is being applied. The Tax and Customs Administration has clarified that a withholding agent must provide the personal details of the entrepreneur in question in both cases (for VAT-exempt services - whether or not invoiced). NB: Should it occur that the individual charges 0% VAT, then this obligation does not apply as far as we are concerned. As the withholding agent, you may rely on the accuracy of the data used by the individual.

Clarification Dutch Tax Authorities

In the meantime, the DTA have provided more clarity on the scope of this exception. In a manual specifically for the submission of data by 1 January 2023, the DTA explain that the exception should be read grammatically and that the exception only applies if an invoice is issued stating the charged VAT. If the entrepreneur does not issue an invoice, or if an invoice without VAT is issued for the work or services carried out, you are still obligated to report data.

What does this mean for you?

The scope of application of the new reporting obligation has not changed as a result of this explanation. However, the explanation of the DTA may mean that you will have to adjust your administrative processes. Are you liable to withhold payroll taxes and do you work with VAT-exempt entrepreneurs? If so, please ensure that you also report the data of these entrepreneurs to the DTA.

Please note that after the end of the calendar year, the data must be submitted to the DTA by 31 January at the latest. Although the new reporting obligation came into force on 1 January 2022, the data submission will actually take place for the first time between 1 January 2023 and 31 January 2023. Your PwC advisor is of course available if you have any questions about your obligations.