Netherlands: Consultation on draft bill on VAT adjustment on services to immovable property
Consultation closes 2 April 2024
As previously announced in a letter accompanying the 2024 Tax Plan, the Ministry of Finance published a draft bill for consultation on the adjustment of value added tax (VAT) on services to immovable property such as buildings (e.g., renovations, repairs, and (major) maintenance) that exceed €30,000.
The consultation closes on 2 April 2024, and a stakeholder meeting is planned for 12 April 2024.
Draft bill
Under the current VAT adjustment rules, the VAT recovery applied for such immovable property services is in principle final at the end of the financial year in which use was first made of the services. If, for example, a renovated building (the renovation of which does not result in a new immovable property for VAT purposes) is put into use on 1 July, the VAT recovery on the renovation service is in principle final at the end of the financial year of first use. A changed VAT use in a later financial year does not lead to an adjustment of the previous VAT recovery.
Under the draft bill, a VAT adjustment period of approximately five years would apply, during which changes in the VAT use of the renovated immovable property may lead to an obligation to partially repay VAT previously recovered or to an additional VAT recovery right. Thus, including the year of first use, an entrepreneur would annually (re)assess 20% of the initial VAT recovery for five financial years on the basis of the VAT use of the service (for VAT-taxed or VAT-exempt services) in the relevant financial year. If the VAT use in the relevant financial year deviates from the VAT use in the financial year of first use, the initial VAT recovery must in principle be adjusted.
The new rules are proposed to become effective for services to immovable property put into use after 1 January 2026.
Background
A consultation on a similar bill took place in 2017, but the proposal was not pursued, partly as a result of the responses to the consultation. Criticism mainly concerned the enormous complexity and broad scope of operation. For this reason, the Ministry of Finance has proposed that the new rules only apply to services that exceed €30,000.
Read a March 2024 report prepared by the KPMG member firm in the Netherlands