Doing business in the Netherlands as a foreign entrepreneur can be very attractive. However, one may be put off by all the administrative obligations that need to be met for Dutch VAT. To ensure that you meet all administrative obligations for Dutch VAT - without too much effort - you can use a tax representative. This will save you a lot of time, effort and possible problems with the tax authorities. A tax representative will take care of matters relating to VAT on your behalf, including filing the VAT return and paying the tax.
Tax representation in general
I hear you thinking "What does tax representation actually mean?". Tax representation is basically - as the name suggests - representing another person for their tax obligations. Contrary to what the name suggests, this form of representation looks only at VAT, and therefore does not cover all tax matters that a foreign entrepreneur may have to deal with. 'VAT representation' might therefore have been a clearer name. Tax representation makes life a little easier for foreign entrepreneurs operating in the Netherlands. As a foreign entrepreneur, you do not need to study the Dutch VAT regulations because you can outsource this to a Dutch entrepreneur who will take care of it for you. The Dutch entrepreneur to whom the VAT obligations are outsourced thus becomes logically responsible for the VAT obligations. As a rule, the tax representative takes over all administrative obligations regarding VAT from the foreign entrepreneur.
An entrepreneur residing or established in the Netherlands who wants to act as a tax representative for you must have a licence to do so. The following will discuss what requirements apply to a licence for tax representation.
Licence requirements
In principle, any entrepreneur living or established in the Netherlands can act as a tax representative. However, the entrepreneur must meet a number of conditions. These conditions are as follows:
a. the applicant lives or is established in the Netherlands;
b. the applicant has not, within the past 5 years, been irrevocably convicted of a violation of the statutory provisions on state tax or customs;
c. the applicant keeps records which comply with conditions to be set by ministerial regulation;
d. the applicant provides security up to an amount determined by the inspector;
e. the applicant provides the inspector with information necessary to determine the amount of the security.
To obtain a licence, a written request must be submitted to the inspector. In this request, the applicant must enclose a statement showing that he is authorised on your behalf, the foreign entrepreneur, to act as tax representative for you.
General and limited representation
As discussed earlier, those wishing to act as tax representatives must hold a licence to do so. We have two types of licences, the general licence on the one hand and the limited licence on the other.
General licence
The holder of a general licence, also called the general tax representative, acts on behalf of the foreign entrepreneur for all supplies and services for which the foreign entrepreneur owes VAT. Only those operations for which the foreign entrepreneur has already appointed a limited tax representative are exempt from this. A foreign entrepreneur can only use one general fiscal representative.
Limited licence
The holder of a limited licence, also known as the limited tax representative, only acts on behalf of the foreign entrepreneur for - as the name suggests - a limited number of transactions. Some of these acts include, for example, the import of goods from non-EU countries and subsequent deliveries (excluding distance sales), and the supply or purchase of excise goods, bulk goods and certain mineral oils with 0% VAT. Unlike the general licence, a foreign entrepreneur can use more than one limited tax representative.
Choice between general and limited licence
An important distinction between general and limited representation - which may partly influence the choice between the two - is in the registration for VAT purposes with the tax authorities. For instance, as a foreign entrepreneur, you must also register yourself in the Netherlands if you use a general representative. When using a limited representative, this is not the case, thus here you do not have to register in the Netherlands for VAT purposes. This can be a deciding factor in choosing a limited tax representative instead of a general tax representative. Although it should of course be kept in mind that a limited permit representative can only act for a limited number of transactions, which may not be sufficient.
Conclusion
In this blog, we have discussed tax representation. We have covered what tax representation is, the requirements for qualifying for a tax representation licence and the types of licences/forms of representation. Finally, an advantage and disadvantage of both forms of representation have been briefly given in order to facilitate the choice between the two.
Want to know more?
Do you have questions about customs law or international trade? Or would you like to know more about tax representation and which form is best for you? If so, please feel free to contact one of our lawyers.
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