Dutch “New small businesses scheme” provides VAT exemption for the Dutch businesses, w.e.f. Jan 1, 2020
The Netherlands introduces a new VAT small businesses scheme (kleineondernemersregeling—KOR) which provides VAT exemption for small businesses with effect from January 1, 2020. Unlike the old KOR scheme, the scope of the new KOR scheme is much wider, now the legal entities like private companies (besloten vennootschappen—BVs) can opt for the new KOR system.
Who can avail the new KOR scheme?
The new KOR scheme can be availed by any business who
- is established in the Netherlands or has a fixed establishment in the Netherlands and
- has its annual turnover (realized in the Netherlands) below EUR 20,000.
In case the turnover exceeds EUR 20,000, the scheme automatically ceases to apply.
Benefits under the new KOR scheme
The new KOR scheme is optional but it is beneficial to small businesses in many ways such as:
- Exemption from VAT;
- Exemption from sending invoices (however the copies of purchase invoices have to be maintained);
- No charging of VAT to customers;
- No obligation to file VAT returns;
- No obligations for maintaining a complete set of accounts;
- No obligations for record maintenance relating to VAT.
The implications for businesses are as follows:
- Small companies, who usually are in the VAT-remittance position and have to pay VAT for each taxable period or end up not getting input tax credit due to an inverted duty structure, can benefit from this scheme.
- Legal persons including private limited companies can avail VAT exemption, under the old KOR scheme, only natural persons or partnerships of natural persons could avail the benefit.
- If businesses charge VAT to customers on their invoice they will lose their exemption.
- This is especially relevant for the startups which have just commenced operations, as they can avoid the compliance requirements.
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