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Netherlands: VAT exemption not applicable on instruction to transfer money

Netherlands: VAT exemption not applicable

The Advocate General of the Court of Justice of the European Union (CJEU) on 21 March 2018 issued an opinion concluding that the exemption from value added tax (VAT) for payments cannot be applied to a service provider that only instructs banks to transfer sums of money.


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The CJEU Advocate General concluded that giving such instructions is a “mere physical, technical or administrative service” that is not covered by the VAT exemption for payments. According to the Advocate General, such a service does not involve the execution of the transfer itself, and thus does not directly result in the legal and financial changes—characteristic for the VAT-exempt transfer of money.

KPMG observation

If the CJEU follows the opinion of the Advocate General, it appears there would be a more limited scope of the VAT exemption for payments. A strict interpretation would mean that only the parties that actually make the payment—and that thus bring about legal and financial changes—could apply this exemption. Other links in the payment chain could not apply the VAT exemption for payments. Several parties that are not directly involved with the execution of the payment, but are currently applying the VAT exemption, could be affected by the CJEU’s ultimate judgment. Parties that offer their services directly to individual consumers or are paid by the banks may be affected by this case. 

Whether the CJEU follows the Advocate General’s opinion in this case remains to be seen. There are also two other cases concerning payment and transaction services pending before the CJEU. One of these cases concerns a service provider involved in the operation of cash dispensers, and the other concerns a factoring situation.


Read a March 2018 report prepared by the KPMG member firm in the Netherlands

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