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VAT & Fiscal Representation

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VAT registration and general fiscal representation allow both EU and non-EU companies to make use of and benefit from all facilities of the EU VAT system, without having to register for any other taxes in the EU. Please also visit our page with informative videos, explaining various aspects of the EU VAT system. 

VAT registration

Any non-EU or EU company can register for VAT in the EU. It is possible, but no obligation, to hire the services of an EU tax consultant or administrator so that all communication with tax authorities and all VAT declarations can be done in the proper way. The company will get a regular VAT number, which has to be used with all its relevant transactions. Every month, a VAT declaration will have to be filed with the national tax authorities. If VAT is to be paid, then, of course, there is no problem. If a refund of VAT is requested, tax authorities will likely ask for documentation to support the request. Over time, the foreign company will build up a track record and contacts with tax authorities will become routine.

Having a VAT number means one can sell goods to any EU entity. Goods can be sold to individuals or to businesses. If goods are sold in the country of registration, VAT has to be charged. If goods are sold to a company in another member state, an intra-community transaction has to be filed. When goods are exported, an export declaration has to be made.

General Fiscal Representation

Neither a non-EU or an EU company that have a VAT registration cannot use the VAT transit rule when importing goods. This means that VAT has to be paid on imports of goods from outside the EU. Of course, this VAT can be reclaimed via the next monthly or quarterly VAT declaration. However, this means a cash flow disadvantage because import VAT needs to be pre-financed. The solution to reverse charge the import VAT is to apply for a license to use General Fiscal Representation. A General Fiscal Representation license is linked to the VAT number granted to the EU or non-EU company. In addition, a GFR license is only granted when a bank guarantee is issued to the tax authorities covering the risks involved. Consequently, permission to transfer the import VAT will be connected to the VAT number. The bank guarantee needs to be a minimum of € 5.000,- and a maximum of € 500.000,- for consumer goods. 

Permission to act as a General Fiscal Representative (GFR) is granted to a national company. Customs brokers often take this responsibility, as they are involved in the import process anyway. The GFR is liable toward the tax authorities for all taxable activities the represented company develops in the EU. So it does not matter whether or not the GFR knows about the activities that are being undertaken under the VAT number. This liability, however, is limited to the amount of the bank guarantee. The customs broker, being a GFR, will therefore always ask the tax authorities for the lowest possible bank guarantee, as the GFR is liable for the full bank guarantee for the ensuing five years.

Bank Guarantee

To act as a GFR, a bank guarantee must be issued to the Dutch treasury. The amount of VAT that the foreign company is expected to be liable for, must be secured by the General Fiscal Representative. Each year, the GFR is liable for the full amount of the bank deposit. But as the treasury can make additional tax demands in the ensuing five years, the liability of the GFR is in practice five times the amount of the bank guarantee. In order to protect itself, the GFR will generally ask its foreign client for a bank guarantee of five times the bank guarantee given to the treasury. The amount of bank guarantee that the treasury asks from the GFR is legally fixed. The amount of VAT that the foreign company is expected to be liable for each quarter must be secured by the GFR.

Straightforward VAT registration or General Fiscal Representation, a summary

A foreign company that wants to be represented for VAT in the Netherlands, can choose to apply for a plain and simple VAT registration or apply for General Fiscal Representation. The advantage of General Fiscal Representation is that import VAT can be reverse-charged to the VAT return, based on article 23 of Dutch VAT law. The disadvantage of GFR is that bank guarantees have to be issued to both the tax office on behalf of the GFR and to the GFR, to cover the 5 years of liability. The advantage of a simple VAT registration is that no bank deposit has to be issued. On the other hand, import VAT has to be prefinanced, thus creating a cash flow disadvantage. In both cases, complete and elaborate VAT records must be kept. Both the straightforward VAT registration option and the GFR option can also be used for domestic and European sales and for deducting inland VAT. Maco will take care of the filing of the VAT returns, possible EU sales and Intrastat returns, based on your incoming and outgoing invoices.  We will also assist you in all communications with tax authorities. 

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