On 4 June 2012, the State Secretary for Finance sent the draft law that executes the measures announced in the governmental budget agreement, also known as the Spring Agreement, to the Dutch House of Representatives. The measures included in the agreement were, for the most part, already known, but the draft law, its supplements, and the advice to the Council of State include some interesting points.
Rate Increase and Transitional Law
The planned increase of the standard rate of value added tax (VAT) to 21% per 1 October 2012 was made public last month. The draft law outlines the starting points for the transitional law—which rate will be applicable to the supply of goods and services that are supplied or invoiced during the transitional period. This transitional law is needed because, in principle, VAT is due when the invoice is issued or should have been issued. The starting point is that the supplies of goods or services supplied before 1 October 2012 are taxable at the old (19%) rate, and supplies thereafter are taxable at the new (21%) rate. This means that earlier invoicing will not lead to a lower tax rate. The extra VAT will, however, not be due until 1 October 2012. For example, if an invoice is issued in September for a supply that takes place or is completed in October, 19% VAT is due in September, and a further 2% VAT is due on 1 October 2012.
For immovable property supplied after 30 September 2012, but for which the agreement has been concluded before 1 October 2012, it has been agreed that where there is payment in installments (naturally very common in construction), the agreement shall be leading. Therefore, if the agreement stipulates certain installments, and these are payable ultimately before 1 October 2012, then 19% VAT is due on those installments. On the installments due after 1 October 2012, 21% VAT is due. This regulation also applies to cases where immovable property is being built, and the first usage leads to a so-called integration charge. That integration charge is then taxed at 19% VAT, insofar as the basis for the charge consists of past installments and costs that have arisen before 1 October 2012 (for the main part of the purchasing of the land), and 21% for installments due after that date and costs that arise after 1 October 2012.
Moreover, in cases where contracts have been signed before the announcement of the rate increase, a taxable business owner is permitted to charge the costs of this rate increase to his customer. Contractual arrangements that agree otherwise are void.
Additional Measures for Transitional Period
The transitional measures in the draft law are the same as general transitional law commonly used. It is customary for a policy decision to provide further details on practical problems. We expect that such a policy decision will more or less be in line with the decision published at the end of 2000 relating to the VAT increase on 1 January 2001 (in that case from 17.5% to 19%).
In the situations as outlined above, where an extra 2% VAT is due on 1 October 2012, we expect that it will be approved that the full 21% VAT may be charged from September. With regard to ongoing services [services without a defined end result (e.g., subscriptions to supplies of goods or services that can be invoiced periodically with a maximum period of one year)], we expect that it will be approved that the period for payment can be split, so that the 19% rate can be applied to the part of the payment that relates to the period before 1 October 2012. There will likely also be approvals on other points.
Rate Decrease for Performing Arts and Pieces of Art
As expected, the exact text of the application of the reduced VAT rate of 6% is reinstated in the draft law. Transitional measures have been announced for this. The sale of tickets from 25 May 2012 for performances that take place on or after 1 July 2012 can be charged at the reduced rate.
Changes to Exemptions for Medical Services
For medical services, the application of the exemption will, from 1 January 2013, be restricted to the health treatment of individuals by what the BIG Law (a Dutch law regarding practitioners in individual healthcare) calls Registered Medics. If a treatment does not fall under the BIG Law or is carried out by a medical professional not listed in the BIG register, the exemption no longer applies. It is our opinion that these rules may not be binding. EU Court of Justice case law states that the same cases should be treated in the same way. If someone who is not BIG-registered but does have the same educational background and provides similar care, that person can also apply the VAT exemption. The difficulty here is—and that is also apparent in the judgments made by the Dutch courts on this point—proving the similarities.
Measures in the Field of Real Estate Transfer Tax
The lower real estate transfer tax rate of 2% on the acquisition of homes will become definite. A temporary reduction that was, in principle, due to become redundant on 1 July 2012 was already in place. The reduction has now become definite.
Further Handling of Regulations
The submitted draft law will be dealt with in both Chambers of the Senate. The expectation is that a majority will vote for the proposals, and we expect little or no changes to the parts relating to VAT. Ryan will monitor any modifications or if further information becomes available about the transitional arrangements.
TECHNICAL INFORMATION CONTACT:
Suzanne C. den Breems
+31 (0) 72 540 1202