When it comes to VAT
Budget 2024 | Tax plan 2025
The following topics are discussed in this newsletter:
Abolition of the reduced VAT rate (9%)
The 2025 tax plan states that the reduced VAT rate will be abolished for several services and goods. Although the amendment to the law must be implemented on 1 January 2025, the amendment will not take effect until 1 January 2026.
The reduced rate will expire on 1 January 2026 for the following goods and services (and therefore subject to the 21% VAT rate):
Table I, a 29 Art: import of works of art, objects for collections and antiques, delivery of works of art by the maker, his/her legal successor or entrepreneurs entitled to deduction.
Table I, a 30 Books: this includes: (digital) photo books, comic books, colouring books, school books (workbooks, workbooks of at least 32 pages), educational information on physical media intended for education; newspapers, weeklies, magazines and other publications published at least three times a year.
Table I, b 2 Lending out books.
Table I, b 3 Providing the opportunity to practice sports and bathe: providing the opportunity to athletes to actively practice sports in or from a sports facility.
Table I, b 11 Providing accommodation within the framework of the hotel, boarding house and holiday spending business to persons who only stay there for a short period, such as: hotels, holiday parks, accommodation rental via platforms, boarding houses, rental of furnished holiday homes and furnished mobile homes; also short-term accommodation to students, employees, asylum seekers.
Table I, b 14-c Granting access to public museums or collections.
Table I, b 14-d Access to music and theatre performances: including music performances (concerts), music festivals, theatre performances, dance performances, musicals and cabaret performances.
Table I, 14-f Access to sports competitions, demonstrations and the like.
Table I, b 17 Performances by performing artists.
Table I, b 21 Digital delivery or lending of books.
This amendment will of course have a huge impact on the pricing of the goods and services in question and/or the profit margin of these companies, where the rate increase cannot be fully passed on to the customer. For the sake of completeness, we would like to point out that the reduced rate will continue to apply to (among others) campsites, amusement parks, playgrounds, circuses, zoos and cinemas.
Many of the amendments are self-explanatory and will not lead to too much discussion regarding the demarcation and definition of the services or goods. As regards the rental of furnished holiday homes or mobile homes (21%), further discussion can be expected, especially if these accommodations are located on a campsite. The legislator is of the opinion that a clear distinction can nevertheless be made between traditional accommodation with a caravan or camper (9%) and holiday homes and mobile homes (21%).
Furthermore, one must be aware that this change also applies to all other forms of accommodation and stay via, for example, platforms (and similar providers) and short-stay accommodations (also 21%).
By not allowing the change to enter into force until 2026, entrepreneurs have the opportunity to make the necessary preparations. These preparations must be made in their own systems and in the pricing of their own services and goods. In addition, the current reduced rates apply to current subscriptions and, for example, advance payments for services (e.g. theatre, music festivals, access to sports competitions) that will not take place until 2025. If the amendment were to enter into force on 1 January 2025, entrepreneurs would no longer be able to take this into account.
Finally, we would like to note that the legislator wants to prevent any form of 'planning or abuse' with the entry into force on 1 January 2026. A special provision has been included for this purpose, on the basis of which (simply put) advance payments in 2025 (still 9%) for services that are actually purchased in 2026 (21%) will already fall under the standard VAT rate in 2025 (21%).
Investment services | correction of VAT deduction (adjustment) on services to real estate
In an earlier news item, we already informed you about the plan to include investment services under the adjustment rules. The adjustment rules stipulate that the VAT already deducted can still be corrected (adjustment) later on the basis of the use of (currently only) goods. For a further explanation of the adjustment rules, please refer to the earlier news item.
These adjustment rules will also apply to services to real estate (investment services). Although the amendment to the law must be implemented on 1 January 2025, the amendment will only take effect on 1 January 2026.
The amendment to the law only applies to:
All other services that do not fall under this definition are not affected by the adjustment rules.
Very important elements in the implementation of this amendment are:
The amendment itself is short and simple. However, we expect that the implementation in practice will be less simple. This starts with the allocation and booking of ‘normal’ services and ‘investment services’. In the case of work, conversions or renovations of real estate, multiple suppliers are quickly involved, who can also provide different services. The threshold of € 30,000 seems to be a substantial amount, but will quickly be exceeded for many works on real estate.
We understand from the bill that the following activities fall under the definition of investment services:
The bill also notes that cleaning and window cleaning do not fall under the definition of investment services.
Margin scheme – changes per 2025
The margin scheme is being adjusted in two ways.
In an earlier news item, we explained that the margin scheme no longer applies if the goods in question were purchased at the reduced VAT rate (9%). When selling these goods, the full compensation falls under the standard rate (21%), as of 1 January 2025. In the earlier news item, we also indicated that a short transitional arrangement applies to still deduct the VAT on the purchased goods.
Based on the 2025 tax plan, the margin scheme is also being adjusted on another point. This does not actually concern a change in the margin scheme itself, as it concerns the application of the reduced VAT rate (9%). This adjustment of the VAT rate falls under the more general (intended) change to abolish multiple reduced VAT rates as of 1 January 2026.
The 2025 tax plan stipulates that as of 1 January 2026 the reduced VAT rate will no longer apply to:
By not allowing the change to enter into force until 2026, entrepreneurs have the opportunity to make the necessary preparations. These preparations must be made in their own systems and in the pricing of their own services and goods.
Other legislative changes as of January 1, 2025
Below we will briefly discuss three other legislative changes.
1. Small business scheme
With the amendment to the small business scheme as of 1 January 2025, it will also be possible to apply this scheme in other Member States. When applying the small business scheme, the entrepreneur (in short) does not have to charge VAT, but cannot deduct the VAT charged to him either. Whether or not to apply this scheme is and remains an option for entrepreneurs.
2. VAT refund for non-EU travellers
Travellers who live outside the EU and buy goods in the EU and then take these goods with them to their place of residence outside the EU can, under certain conditions, reclaim the VAT paid. The refund process is still fairly traditional (documents and stamps). As of 1 January 2025, this process will be digitalised, which should make the physical stamping of invoices a thing of the past
3. Extending list of goods | administrative (fictitious) VAT warehouse
Certain goods defined by law may be traded at the 0% VAT rate if these goods are kept in a administrative (fictitious)VAT warehouse. This list of goods will be expanded as of 1 January 2025 to include goods that fall under CN heading 0406 90 (Unprocessed cheese intended for processing: foil cheese and natural cheese)
If you have any questions about this topic or if you would like to discuss the topic further, please do not hesitate to contact us at info@vatpartners.com
18-09-2024 - Budget Day 2024 - In this news item we provide a summary of the (proposed) legislative changes regarding Real Estate Transfer Tax
Read more11-09-2024 - In 2025, the margin scheme will be changed, meaning that entrepreneurs will no longer be able to apply the scheme if the goods were purchased with the reduced VAT rate. As a result, when these goods are sold, the full compensation falls under the (usually) 21% rate.
Read more21-05-2024 - The discussion about whether a new building can be created for VAT purposes after a conversion or a major renovation is not new. This applies in particular to the question of how to determine whether there is actually a new building after a conversion (major) renovation. In this news item we provide an update on this still ongoing discussion.
Read more17-05-2024 - The Court of Justice has ruled that entrepreneurs are still entitled to a VAT refund from other Member States, even if certain deadlines are not met
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