Netherlands: Temporary reduction in VAT on energy and excise duties on fuel

The Dutch Senate passed on 28 June 2022, legislation that:

• Reduces the value added tax (VAT) rate on energy from 21% (general rate) to 9% (reduced rate) effective 1 July 2022
• Reduces excise duties on fuel by 21% with retroactive effect to 1 April 2022

The objective of these temporary measures is to counteract the impact of the current price increases for consumers due to the energy crisis.

The reduced VAT rate will be applied to the supply of natural gas via the natural gas system, the supply of district heating via a heating network and the supply of electricity via the electricity grid from 1 July through 31 December 2022. The reduced rate will apply to supplies during that period only. As a result, supplies will have to be broken down by deliveries before and after 1 July 2022, on the final bill for 2022.

Excise duties on unleaded light oil (petrol), gas oil (diesel) and liquefied petroleum gas (LPG) will temporarily be reduced by 21% with retroactive effect to 1 April 2022. The tax authority will accept refund requests for excise duties as of 1 April 2022, with respect to fuels already on the Dutch market for commercial purposes.

There are a number of practical and potentially unexpected aspects of the reduced VAT rate on energy that need to be considered:

• The supply of electricity for charging electric vehicles is subject to the 9% rate if the costs are recharged in the chain. The lower kWh price inclusive of VAT will produce a price gain for motorists who are not in a position to deduct all or part of the VAT on car expenses as input tax. This also applies if the costs of electricity are recharged via parties other than the actual operator of a public charging station.
• The supply of energy by landlords of commercial properties to tenants is typically included in the service charges that they recharge to their tenants separately inclusive of VAT. Landlords should take into account the reduction in VAT rate on energy from 21% to 9% during the period from 1 July through 31 December 2022.
• Invoices for supplies of energy between 1 July and 31 December 2022, must include the correct VAT rate and the right amount in VAT must be remitted to the tax authority. Otherwise, the VAT is not deductible in principle.
• Generally, the applicable VAT rate is based on the rate that is in effect on the invoice date. However, the legislation includes a transition rule that offers an explicit exception in that the supply date rather than the invoice date is decisive for the VAT rate.
• Any prepayments or subsequent payments invoiced or received outside the period from 1 July through 31 December 2022, that do, in fact, relate to supplies within that period are subject to the reduced VAT rate. Conversely, the rate of 21% applies to prepayments or subsequent payments invoiced or received within the period from 1 July through 31 December 2022, for supplies before 1 July 2022, or after 31 December 2022.

Read a June 2022 report prepared by the KPMG member firm in the Netherlands