Netherlands: Concerns regarding the implementation of VAT e-commerce on July 1st.

From the VAT report on cross-border digital services on EU’s VAT regulation published by the Court of Audit on the 28th of November 2018, it was made clear that there were concerns about the orderly and timely implementation in 2021 of the new VAT regulations.

Although some countries like the Netherlands have requested the postponement of the new rules it has now become clear that the implementation of the new VAT rules at EU level will take place from 1 July 2021. This leaves the Dutch government only half a year to get ready.

The foregoing means that the Tax Office still faces a major challenge in achieving a timely implementation. The General Court of Auditors sees, among other things, the following bottlenecks:

• The implementation will have to rely in part on temporary facilities and manual (emergency) procedures.
• In addition to the adjustments resulting from EU regulations, account should also be taken of systemic changes resulting from Brexit.

Failure to implement a well-functioning facility in a timely manner can have (financial) consequences for Dutch business and for the State:

• o Loss of (VAT) revenue for the Netherlands. The European Commission has estimated the revenue from the e-commerce package at €7 billion per year for the eu as a whole. For the Netherlands, it is about € 150 million per year.
• o Entrepreneurs cannot register for or use the new one-stop shop system. This can lead to a diversion of trade flows related to e-commerce.
• o Vat returns and payments from other EU Member States addressed to the Netherlands cannot be processed through the new one-stop shop system.
• o Digital service providers may not be able to continue to use the existing MOSS system and may have to register in the various Member States where they owe VAT.
• o The European Commission may initiate infringement proceedings against the Netherlands in the case of untimely implementation and, in addition, claims for damages from entrepreneurs and other Member States are possible.

Even if a workaround can be implemented on time, additional work will be needed to ultimately achieve a structural solution.

The Dutch government’s response:

In his response, the Secretary of State states that he is aware of the findings and they are fully recognized by him. He realizes that the failure to implement the VAT e-commerce package in time as of 1 July 2021 has major (financial and logistical) consequences for Dutch business and for the State. He has therefore asked the Tax Office at the beginning of 2020 to make every effort to speed up the implementation, with the result that the implementation, partly with temporary measures, could be brought forward to 1 January 2022.

The Secretary of State recognizes that speeding up the implementation to 1 July 2021 involves several risks, which are identified and provided with risk mitigation measures. He is aware that these risks are very serious and that there is a very time-critical implementation, which is also complex and extensive. The Secretary of State expects the current investigation of the Tax Office to be completed very soon, after which he will clarify the possible acceleration to 1 July.

Source: btwjurisprudentie.nl