If you're a solo entrepreneur in the Netherlands, you'll have come across BTW (VAT in the English speaking world). In my bookkeeping practise I get asked a lot about this, so I thought I'd to help you understand how VAT (Value Added Tax) works in the Netherlands. Let's break it down into simple terms so it's easy to understand.
What is VAT?
VAT is a tax that businesses add to the price of goods and services. When you buy something, you often see VAT added to the total price. But did you know that some solo entrepreneurs, also known as zzp’ers, don’t have to charge VAT to their clients? Let’s dive into who is exempt and how it all works.
Who Doesn't Have to Charge VAT?
Healthcare and Education Workers
If you work in healthcare or education, you might be exempt from charging VAT. This means you don’t have to add VAT to your invoices when you bill your clients.
Doctors and Dentists
Doctors and dentists are also exempt from charging VAT.
Purchases
Even if you don’t have to charge VAT to your clients, you still pay VAT when you buy things like a company bicycle or a laptop. You can’t get this VAT back, so think carefully before making big purchases.
What is VAT Shifting?
Construction Workers
If you work in construction, like painting, plastering, or electrical work, you might not have to charge VAT on your invoices. Instead, the main contractor you work for will handle the VAT. This is called "VAT shifting."
How to Invoice
When you shift VAT, make sure to write "VAT shifted to..." on your invoice so everyone knows who is responsible for paying the VAT.
Filing Your VAT Returns
Every Three Months
Even if you don’t charge VAT, you still need to report your earnings to the tax office every three months. This is called a VAT return.
Where to Report
On your VAT return form, don’t put your shifted VAT earnings in question 1A. Instead, put the total amount in question 1E.
The Zero VAT Rate
Selling to Other EU Countries
If you sell goods to someone in another EU country, you can charge 0% VAT. This means you don’t add VAT to the price, and the buyer can reclaim the VAT in their country.
Keeping Good Records
Why It’s Important
It’s super important to keep accurate records of all your business transactions. This includes invoices, contracts, and loans.
How Long to Keep Records
You need to keep all these documents for seven years. This helps if you ever get audited or need to show proof of your earnings and expenses.
Get Advice
To make sure you’re doing everything right, get advice from the Chamber of Commerce and an accountant. They can help you understand the rules and keep your business running smoothly.
Conclusion
Understanding VAT can seem tricky, but it’s important for running your business smoothly. Remember to check if you’re exempt, know when to shift VAT, file your returns on time, and keep good records. And don’t hesitate to ask for help when you need it. Happy entrepreneuring!