Goods leaving the European Union must be made VAT-free. Therefore, when exported from the Netherlands, the 0% rate applies. Through the 0% rate, the customer is not charged VAT but is entitled to deduct input VAT. The EU VAT Directive shapes this by means of an exemption while maintaining the right to deduct VAT.
Performing directly
The 0% rate may also be applied to services on goods destined for export from the EU. For example, the transport of such goods. The European Court of Justice (ECJ) ruled that the 0% rate may only be applied when the services are provided directly to the consignee or exporter of the goods.
In this case, goods were transported from the port of Riga (Latvia, EU member state) to Belarus (located outside the EU). All actual transport operations were carried out by L.C. These included driving the vehicles, repairs, refuelling, completing customs formalities, guarding the goods and the work necessary for loading and unloading.
L.C. performed these (transport) services on behalf of Atek. Towards the principals, Atek acted as the carrier. The ECJ ruled that the European VAT legislation must be interpreted to mean that only Atek may apply the 0% rate. Atek makes the supplies directly to the principals. L.C. makes its supplies to Atek and, despite LC carrying out the actual (transport) operations, was not allowed to apply the 0% rate.
Dutch regulation
In the Dutch Regulation belonging to Table II of the Turnover Tax Act 1968 provides that the 0% rate may be applied in relation to the transportation of EU outbound goods if:
- the transport document lists as consignee a shipbroker, ocean carrier, air charterer, airline, customs broker or international carrier and;
- the content of the customs document shows that the goods will be transported to a non-EU country immediately following the transport.
The Dutch regulations seem to contain more room for the application of the 0% rate, than the ECJ ruling described above allows. As long as the Regulations are not amended, carriers can rely on them. Whether the ruling will prompt the Dutch government to amend the regulation will be seen in the future.
Proof that the 0% rate has been correctly applied rests with the performing entrepreneur. The tax authorities generally set quite high requirements for this proof.
Container
The Prescription to Table II has a specific regime for services relating to containers, which tend to be used in international traffic. To these services, the 0% rate may be applied without considering whether the container transported actually leaves the EU. This practical approval covers the hiring, carriage, repair, maintenance and storage of empty containers.
Place of service
The application of the (0%) rate only comes into play after it has been determined that the place of supply of the (transport) service for VAT purposes is in the Netherlands. If you would like to know more about determining the place of supply of services and the application of the 0% rate, please contact VWGNijhof's advisers.