Netherlands: Adjustments to VAT return for employer-provided gifts, benefits, private use of company cars
Netherlands: Adjustments to VAT return
The final value added tax (VAT) return for the financial year—for most businesses, the return for the fourth quarter of 2020 or the December 2020 return—must include adjustments under the VAT “deduction exclusion decree” and for the private use of company cars.
The adjustment affects the recovery of VAT on staff benefits, promotional gifts, and other gifts.
The VAT “deduction exclusion decree” (Besluit uitsluiting aftrek omzetbelasting) precludes the recovery of VAT (also referred to as input VAT) on promotional gifts and staff benefits if provided free of charge or below cost by the employer. The fact that employers may have a business-motivated reason for providing gifts and staff benefits (for example, client relationship management, staff commitment, etc.) is irrelevant. The rationale for not allowing input VAT to be recovered is based on the fact that these costs, while business-related, are consumption-oriented, and VAT is a tax specifically designed to tax consumption. A threshold of €227 per recipient applies.
- If the total purchase or productions costs (the cost price) of the provisions are less than €227 (excluding VAT) per recipient per financial year, then the employer does not have to make a deduction exclusion decree adjustment.
- If the threshold is exceeded, then the employer must make an adjustment in the last VAT return of the financial year. This is a final threshold—if the threshold is exceeded, the input VAT on the provisions within the threshold amount is also non-recoverable.
Read a January 2021 report prepared by the KPMG member firm in the Netherlands that includes a flowchart setting out the steps for preparing the VAT deduction exclusion decree calculation and also explains the effect of the VAT adjustment for the private use of company cars.
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