VAT (Value Added Tax)
BTW (belasting over de toegevoegde waarde) is the Dutch term for VAT – Value Added Tax. As an entrepreneur, you are required to charge VAT on your sales and remit it to the Tax Authority. At the same time, you may deduct the VAT you pay on business purchases (input tax). So you only remit the difference. There are three VAT rates in the Netherlands: the standard rate of 21%, the reduced rate of 9% (for food, books, medicine, and certain services), and the zero rate of 0% (for exports and intra-community supplies). Some services are exempt from VAT, such as medical care and education. As an entrepreneur, you must file periodic VAT returns – usually quarterly, but monthly for larger revenues. In the return, you process the VAT you charged to customers minus the VAT you paid to suppliers.
Example
You are a freelancer and invoice a client €1,000 excluding VAT. You charge 21% VAT = €210, so the client pays €1,210. In the same quarter you buy a laptop for €800 + €168 VAT. In your VAT return you remit €210 – €168 = €42 to the Tax Authority.
Why does this matter?
VAT is a recurring concern for every entrepreneur. Mistakes in your VAT return can lead to fines and additional assessments. Make sure your administration is in order and that you know which rate applies to your products or services.
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