Starting 1 January 2020 a new small business regulation (a.k.a. ‘KOR’) for VAT will come into force.
1. Old regulation (until 2019)
Under the old regulation – which is applicable up to 2019 – sole traders/zzp’s and cooperations of natural persons (‘maatschap’, VOF) are eligible for a reduction of VAT if – on balance – the VAT payable for the year is less than € 1.883.
2. New regulation (starting 2020)
- An NL-based VAT entrepreneur does not have to charge VAT to clients in case the turnover is less than € 20.000 per year.
- The input VAT is no longer deductible.
- Possibly a revision has to take place of input VAT that was deducted in the past.
- No longer VAT returns have to be filed, invoices to be issued to clients and there are limited administrative obligations.
- The new regulation also applies to legal persons (BV, stichting, vereniging).
- Participating to the new regulation is voluntary but is minimally for 3 years.
- Registration and de-registration for the regulation takes place with the NL tax office.
- The regulation obligatory ends at the moment the annual turnover exceeds € 20.000.
- To participate per 1 January 2020, the registration has to be received by the NL tax office at the latest on 20 November 2019.
In more detail:
An NL-based entrepreneur with a turnover of less than € 20.000 ex VAT per year, does not have to charge VAT to customers when applying the KOR.
It applies to turnover which – if the KOR would not apply – would be taxable with VAT, therefore not the turnover from VAT-exempt services (like medical services, etc). To assess the turnover threshold, the VAT-exempt turnover from the delivery and lease of real estate, financial services and insurance services dóes apply.
The input VAT on purchases and investments is no longer deductible.
Input VAT from before the KOR applied
In some cases the input VAT that was deducted before – i.e. before the KOR applied – has to be added again. This is called revision. This is the case if the total amount of the revision in a year would exceed € 500. This can apply for example in case earlier a substantial investment was done (car, laptop, etc.).
No VAT returns, no invoices to be issued, limited administrative obligations
No VAT returns have to be filed anymore.
However, in some cases an incidental VAT return has to be filed (for example in case of a reverse-charge of VAT from another EU country).
No invoices have to be issued to clients anymore. It is allowed, but then it should mention that a VAT exemption applies.
There are administrative obligations for the purchases. It is sufficient if the entrepreneur preserves the invoices issued to him in an orderly manner.
Participation voluntary but minimally for 3 years, registration and de-registration with the NL tax office
If the conditions are met, the entrepreneur can choose to participate with the KOR. But participation is for a period of 3 years minimally.
The registration form is on the website of the NL tax office (to be filed by regular mail). The NL tax office needs about 4 weeks to process the application, so the registration form has to be sent at least 4 weeks before the starting date of the VAT period. To participate as of 1 January 2020, the registration form even has to be received 20 November 2019 at the latest by the NL tax office.
De-registration takes place with a de-registration form, also available on the website of the NL tax office (to be filed by regular mail). Here also the process time is about 4 weeks. After de-registration, a registration can only take place after 3 years.
Obligatory ending when the annual turnover exceeds € 20.000.
At the moment the annual turnover exceeds € 20.000, the KOR no longer applies as of that date. The KOR expires with the delivery or services with which the € 20.000 is exceeded.
The NL tax office should be informed immediately with the de-registration form. The regular VAT rules apply again, so for example invoices have to be issued again and VAT returns have to be filed.
3. Closing remarks
Whether application of the new KOR is attractive differs per situation:
- Participating to the KOR reduces the administrative obligations.
- If clients cannot deduct input VAT (for example because they are individuals or VAT-exempt entrepreneurs) than possibly services can be provided cheaper to them.
- If a substantial investment is expected, it might not be attractive if the KOR applies.