These are complex terms, which we’ll explain to you in a moment. The difference is that VAT on intra-Community supplies is 0%, whereas VAT must be paid on distance sales within the Netherlands. This issue arises, amongst other things, for online shops operating internationally.
Court
The reason is a ruling of the Gelderland District Court. The case concerns a seller of high-quality timepieces based in the Netherlands. He sells the timepieces in various countries. This is done primarily via an online platform. The timepieces are subsequently delivered to a legal entity established in the country of destination, which then passes them on to the end customer.
Burden of proof
The trader argues that these are intra-Community supplies. It is established case law that the (very strict) burden of proof in this regard rests with the trader. The trader must prove that:
- the goods have been supplied to a VAT-registered business (as verified by the customer’s VAT registration number) and;
- they have actually been transported from the Netherlands to the EU Member State of destination.
Intra-Community supplies in the Netherlands are subject to the 0% rate. However, the recipient business must pay VAT in its Member State in respect of the intra-Community acquisition of the goods.
Distance sales
The Court ruled that the trader had not met the above burden of proof during the period in which he was operating via the online platform. He did, however, meet it in the period that followed, when deliveries were made to foreign legal entities.
In particular, the requirement that it must be established that the goods were supplied to a VAT-registered trader has not been met. And this is where the rules on distance sales come into play. A distance sale is deemed to have taken place if the goods are supplied:
- to a non-VAT-registered business and;
- the dispatch or transport of the goods is carried out or arranged by the supplier.
For VAT purposes, the place of supply is therefore in the Netherlands, which means that VAT must be paid in the Netherlands (at the standard VAT rates, of course; not at 0%).
Threshold
Once a threshold is exceeded, VAT is no longer payable in the Netherlands, but in the Member State to which the goods are destined.
A separate one applies to each Member State threshold. If the threshold for distance sales is exceeded, Dutch businesses must register in the relevant Member State in order to comply with VAT obligations there. In general, this will require engaging a consultant in the country concerned.
New rules
New VAT rules are being drawn up for distance sales (e-commerce). We set them out in our article Simplification of VAT for e-commerce.
Output
The rules on distance sales do not apply when goods are sent to a destination outside the EU. In such cases, this constitutes an export from the Union. For exports from the Netherlands to destinations outside the EU, the 0% tariff applies.