The invoice in VAT (note)

As this is a comprehensive memorandum, we recommend that you include it in pdf-format. This note was updated on 23 October 2017.

A VAT-registered business must (among other things) declare and pay to the tax authorities the VAT it charges its customers. From the amount payable, it must (among other things) deduct the VAT charged to it by its suppliers (input VAT).

Given the importance of the invoice within the VAT system, specific requirements apply to its content. We outline these requirements below. Before doing so, we set out a number of general points to bear in mind regarding VAT invoices.

This note is descriptive in nature and is not intended as advice. For the sake of clarity, certain matters have been simplified. VWGNijhof accountants and tax advisers therefore accept no liability for any actions taken or omitted as a result of this note.

Invoice

Any document that serves as an invoice in commercial transactions is treated as such for VAT purposes (regardless of the document’s title). The Supreme Court has ruled that a document constitutes an invoice if it is:

  • in which payment of a sum is claimed;
  • and which, incidentally, contains all the required invoice details.

The invoice is the most important document within the VAT system. On the one hand, it serves as a request to the recipient of the supply to pay the invoiced amount and as the basis for remitting VAT to the tax authorities. On the other hand, the invoice is an essential part of the conditions for claiming VAT deduction (see below).

Conditions for VAT deduction

To claim VAT as an input tax deduction, the following conditions must be met:

  • formal requirement: the business must have a valid VAT invoice;
  • material conditions:
    • the goods and/or services must have been supplied by a supplier who qualifies as a trader for VAT purposes;
    • the customer must qualify as a business for VAT purposes;
    • the customer must have used the goods and/or services received for their own VAT-taxable transactions[1].

Invoicing obligation

Every VAT-registered business is legally obliged to issue an invoice that meets all the requirements for an invoice for every service provided in a business capacity to a business owner or a legal entity/non-business owner.

An invoice must also be issued for every advance payment.

In recognition of services rendered to a private individual A VAT invoice does not need to be issued, except:

– if the business owner usually[2] performs for entrepreneurs;

– in the case of a distance sale[3];

– upon delivery of a new vehicle.

Of course, there is no objection to a VAT invoice being issued to a private individual in other situations.

Retention obligation

Naturally, the business owner is also legally obliged to:

  • a copy of every invoice issued copy and
  • for each invoice received, the original;

to be retained for at least 7 years. This obligation applies in full to invoices issued electronically (see below)[4].

These documents must be stored in such a way that the invoices can be easily accessed if required.

Arrangements can be made with the Tax and Customs Administration regarding alternative methods of storing (copies of) invoices, as well as regarding the fulfilment of other administrative obligations.

Invoicing date

The invoice must be issued by the service provider to the recipient of the service within 15 days at the end of the calendar month in which the work was carried out.

In the case of a continuing service, the period to which an invoice relates may not exceed one year, provided that:

  • an advance payment (estimated on a pro rata basis) has been agreed at least once every quarter;
  • an annual payment is customary in the industry.

A continuous intra-Community service is deemed to have been performed on the last day of the calendar year.

Award ceremony

The requirement that the invoice must be issued means that the supplier must physically hand over the invoice to the customer (or arrange for it to be handed over). If the invoice has not been issued, the supplier has not fulfilled their invoicing obligation (in practice, suppliers sometimes – contrary to the statutory provisions – use “administrative (credit) invoices”, which are used exclusively for internal purposes but are not sent to the customer; such internal invoices do not qualify as VAT invoices and therefore do not entitle the supplier to deduct VAT and/or claim a refund of VAT paid).

Invoices may be issued on paper (for example, by hand or by post), but may also be sent electronically (for example, by email). The Tax and Customs Administration aligns its approach to the electronic transmission of invoices with the way in which market participants handle e-invoicing.

Naturally, the way in which invoices are drawn up and issued is an essential part of a company’s (administrative) organisation. In this regard, it is advisable to discuss any changes to the invoicing procedure(s) with an accountant in advance.

Self-billing/outsourcing

The basic principle is that the contractor draws up the invoice themselves and issues it to the customer. However, it is also permitted for the invoice to be drawn up and issued not by the contractor, but by:

  • the customer (self-billing);
  • a third option (outsourcing).

The customer is permitted to issue the invoice (self-billing) if[5]:

  • it has been agreed in advance between the parties that the customer will draw up the invoice;
  • the contractor informs the customer in good time of any objections they may have to an invoice;

(the invoice will then cease to be valid and the supplier will have to draw up the invoice themselves, unless the parties subsequently reach agreement on rectifying the invoice and the customer issues a corrected or supplementary invoice);

  • the invoice complies with all the requirements laid down in or pursuant to the law.

In all cases of self-billing and outsourcing, the contractor remains fully responsible for the accuracy of all invoices issued and bears any consequences relating to VAT liability arising from incorrect invoices. The penalty for non-compliance described below may be imposed in full on the service provider.

In the case of self-billing, the invoice must include the following statement: invoice issued by the customer[6].

Services provided by several contractors on a single invoice

Every business owner is obliged to issue an invoice themselves for the service(s) they have provided. In practice, it sometimes happens that entrepreneurs agree that their individual services will be invoiced by one of them on a single document. For VAT purposes, such a document can only serve as an invoice if it contains all the details that would otherwise have to be included on the separate invoices.

All individual traders remain responsible for their own VAT obligations.

Credit note

A credit note is subject to the same requirements as a debit note. In cases where a credit note is used to correct errors in a previously issued debit note (this is known as a credit note), a number of additional conditions must be met in order to avoid having to pay the VAT stated on the original invoice[7]. These conditions are intended to prevent the customer from deducting this VAT. We will not go into further detail regarding these conditions in this note.

Invoice details

The invoice may be drawn up in any language, but the tax authorities may require invoices to be translated.

The following details must be included on the invoice for VAT purposes:

  1. the date on which the invoice was issued;
  2. a sequential number, comprising one or more series (which uniquely identifies the invoice);
  3. the VAT registration number under which the successful entrepreneur the work carried out[8];
  4. the full name[9] and address[10] of the high-achieving entrepreneur;
  5. the full name9 and the address10 of the customer;
  6. the quantity or scope and the nature of the goods supplied or the services provided[11];
  7. the date on which[12] the supply or service has taken place or has been completed (or the date on which an advance payment was made)[13]);
  8. the remuneration in respect of each tariff or exemption;
  9. the unit price excluding VAT, as well as any early payment discounts and other discounts (if these are not included in the unit price);
  10. The VAT rate applied;
  11. the amount of VAT payable;
  12. the following entries:
  • where an exemption applies: any indication thereof[14];
  • in the case of an intra-Community supply: any indication thereof;
  • in the event that the tax is shifted: VAT reverse-charged;
  • where the rules for travel agencies apply: special scheme for travel agencies;
  • where the special scheme for second-hand goods applies: special scheme – second-hand goods;
  • where the special rules for works of art apply: special scheme – works of art;
  • where the special scheme for collectors’ items or antiques applies: special scheme – collectors’ items or antiques;
  • in the case of self-billing (see above): invoice issued by the customer
  • In the case of a simplified intra-Community ABC supply, the invoice may “intra-Community supply” are listed.

In the event of the supply of a new mode of transport the information required to establish that a new means of transport is involved must be provided.[15]

The invoice must comply with the conditions laid down by the EU Member State in which the supplier is resident or established[16]. Although invoicing requirements have been harmonised to a large extent following the introduction of the Directive on invoicing obligations, there are differences at a detailed level between Member States.

In the following cases, less stringent invoicing requirements apply in the Netherlands[17]

  1. For public transport, taxi services and the provision of food and drink.

Public transport

In the case of public transport, the ticket serves as the invoice. Transaction statements for an OV-chipkaart (and similar cards used for travel on a prepaid balance) are treated as equivalent to tickets.[18]. These transaction statements must then include:

  • date of award;
  • identity of a high-performing entrepreneur;
  • the date on which the transport services were provided;
  • distance travelled;
  • the amount of VAT payable or information from which this can be deduced (for example, a statement that the total price includes 6% VAT).

Food and drink

With regard to the provision of food and drink, the usual invoice is sufficient, partly because the VAT charged on these services is not deductible[19].

  1. With regard to petrol vouchers (for land vehicles only)

The customer’s name and address do not need to be stated on the invoice. It is sufficient that the customer can be identified because their details can be traced via the method of payment, whether by bank transfer or otherwise.

  1. In the case of trade-in transactions

Only one invoice needs to be issued, covering the entire trade-in transaction.

It is therefore not necessary to issue two separate invoices. The details that would otherwise have to be included on those separate invoices must appear on the invoice covering the trade-in transaction.

  1. When using the customer’s debit cards to make payments and for direct debits

An invoice may be deemed to be either the part of the transfer form retained by the customer or the bank or giro statement sent to them.

  1. With regard to the location, name and address of the customer

A customer number or similar identifier may be provided.

  1. For wholesale companies

For goods delivered, a code designation approved in advance by the inspector may be used.

  1. With regard to supplies or services for which receipts and similar documents are issued which, in themselves, do not meet the invoicing requirements:

A summary invoice is sent weekly or monthly, referencing the receipts; together, they meet the invoicing requirements. The summary invoice is then regarded as the actual invoice.

Simplified invoice

A simplified invoice may be issued (and used as the basis for deducting VAT) if[20]:

  • the invoice amount does not exceed €100[21];

or

  • The invoice issued is to be regarded as a document or notice that amends the original invoice and refers to it specifically and unambiguously

and

  • there is no question of:
    • cross-border distance sales;
    • intra-Community supplies at the zero rate.

The simplified invoice must in any case state[22]:

  1. the date of award;
  2. the identity of the trader providing the service;
  3. the nature of the service;
  4. the amount of tax;
  5. any reference to the original invoice.

With regard to the simplified invoice, it is important for the recipient of the invoiced service to be made explicitly aware of the substantive requirements for VAT deduction. For example, it must be possible to establish that the invoiced supply was made to the trader claiming the deduction and that the invoice was issued to that trader[23].

Invoice errors

If the invoice does not meet, or does not fully meet, the invoicing requirements set out above, it is considered to be defective. This may have the following consequences:

  • fine for non-attendance;
  • refusal to allow the deduction of input VAT.

Default penalty

Issuing an invoice whose content does not comply with the invoicing requirements set out above is regarded as a failure to comply[24]. For such a failure to comply, the Tax and Customs Administration may impose a penalty of up to €5,278[25]. In principle, this fine may be imposed for each invoice that does not meet the invoicing requirements, but also for each individual omission in each separate invoice. The maximum fine is imposed only in exceptional cases. In ordinary cases, the Tax and Customs Administration will impose a fine amounting to half the maximum (€2,639).[26].

For the imposition of a absenteeismA fine does not require there to be intent or gross negligence. The mere finding of a failure to comply is sufficient to impose the fine. Only where there is a complete absence of fault (avas) should a default fine not be imposed.

Refusal to allow input tax deduction

A condition for the deduction of VAT is that the records of the trader claiming the deduction must include the original invoice issued in respect of the supply, which must comply with the statutory requirements. If that invoice is missing or does not meet the statutory requirements, the deduction of input VAT may therefore be refused.

If the trader has already included the deduction in VAT returns that have been submitted, the refusal of the deduction will, of course, result in the imposition of one (or more) additional assessment(s). If the refusal of the deduction is due to the trader’s wilful misconduct or gross negligence, a offencea penalty may be imposed (this penalty for an offence may be imposed in addition to the penalty for non-compliance described above).

Minor errors on the invoice[27]

In accordance with European case law[28] VAT deduction must not be refused on the grounds of formal defects in the invoice. This is subject to the condition that all the information required to assess whether the substantive requirements for VAT deduction have been met is available. In this regard, account must also be taken of any additional information provided by the trader (in addition to the invoice).

The VAT deduction will still be refused if:

  • the person who issued the defective invoice has not paid the VAT, or has not paid it in full, and the person receiving the invoice knew this or ought reasonably to have suspected it, and has directly benefited from this or has influenced the tax-reprehensible conduct of the person who issued the invoice;
  • the facts and circumstances as a whole justify the conclusion that the purpose and spirit of the statutory provisions would be disregarded if the deduction of VAT were to be allowed.

PLEASE NOTE: the fact that the right to deduct VAT may not be restricted by formal invoicing requirements does not preclude the existence of a failure to comply, as the statutory invoicing requirements have not been met. Penalties may be imposed in respect of such a failure (see above).

Currency

The invoice may be issued in any currency, provided that the amount of VAT payable is always (also) expressed in euros.

The VAT amount in euros must be converted at the exchange rate applicable at the time the VAT becomes payable (see above).

Legal requirements for an invoice

In addition to the requirements set out above regarding the invoice in connection with the levying of VAT, pursuant to the Commercial Register Act[29] The invoice must state the number under which the business is registered in the commercial register (the Chamber of Commerce number). The invoice must also state the business’s “formal” (statutory) name (i.e. not just the trading name).

Incidentally, these details must not only appear on the invoice but also on all other formal documents issued by the company, with the exception of telegrams and advertising material. The details must therefore also appear, for example, on letters, orders, quotations, emails, the website, and so on.

[1] This condition comprises two elements:

  1. the goods or services must have been supplied to the trader claiming the VAT deduction; and
  2. used by that trader for transactions subject to VAT.

[2] Generally speaking, this means: 80% or more. Businesses whose customer base consists of 80% or more businesses or legal entities/non-businesses must therefore also issue VAT invoices to private individuals.

[3] A detailed explanation of this specific scheme is beyond the scope of this note.

[4] If the invoice has been received in paper form, the original paper invoice must be retained. If the invoice is received electronically, the original electronic invoice must be retained.

Unless specific arrangements have been made with the tax authorities, it is not permitted to print an invoice received electronically, and then to keep the printed version and discard the original electronic version.

[5] Section 3.2.3 of the Decree of the State Secretary for Finance of 6 December 2014, No. BLKB2014/704M.

[6] Pursuant to section 3.3.5 of the Decree of the State Secretary for Finance of 6 December 2014, No. BLKB2014/704M.

[7] To avoid the application of Section 37 of the Turnover Tax Act 1968.

[8] In the Senatex judgment, the Court of Justice (CJEU 15 September 2016, Case C-518/14) ruled that the mere absence of the VAT identification number of the supplier must not result in the VAT stated on the invoice being non-deductible (it was established in this judgment that all the substantive requirements for VAT deduction had been met).

[9] In principle, this concerns the legal name of the business owner. The use of a trade name is permitted, provided that this trade name, together with the address and place of residence, is registered as such with the Chamber of Commerce.

In the case of a fiscal unit, it is customary for the invoice to state the name of the part of the fiscal unit that provides the service.

[10] It is permitted to provide a PO box number, but according to the Tax and Customs Administration, this is not sufficient. The address is the place where the business owner actually lives or is based. As a great deal of fraud is committed using so-called ‘PO box companies’, the Tax and Customs Administration appears to be attaching increasing importance to the fact that the customer’s actual business address is (also) stated on the invoice.

Proceedings are pending before the Court of Justice concerning the question of whether VAT deduction may be refused on the grounds that the VAT invoice states only the post office box of the supplier. The Advocate General has concluded that VAT deduction may not be refused (solely) on that ground. The Court has yet to deliver its judgment. ECJ 5 July 2017, Nos C-374/16 and C-375/16.

[11] In the Barlis judgment, the Court of Justice (CJEU 15 September 2016, Case C-516/14) ruled that the term “legal services” is sufficiently precise (it was also established in this judgment that the substantive conditions for VAT deduction had been met).

[12] In the case of ongoing services, the period during which the services were provided may be stated.

The same applies to services that are indivisible or difficult to split (such as those provided by tax advisers, accountants, solicitors, notaries, architects and other members of the liberal professions).

[13] Insofar as the date of advance payment can be determined and differs from the date on which the invoice was issued. In the case of ongoing services, the period during which the supplies and services were provided may be stated instead of the date.

[14] The description must be such that it is clear to both the customer and the tax authorities which tax regime the supplier is applying. The description must be sufficiently specific and must not consist solely of the words “zero rate” or “exemption”.

[15] The regulations set out specific conditions that a means of transport must meet in order to qualify as new for VAT purposes (although the means of transport may already have been used – to a limited extent).

[16] Until 1 January 2013, the conditions of the EU Member State in which the supply was made for VAT purposes applied.

[17] These arrangements are set out in Article 33 of the 1968 Turnover Tax Implementing Order. These rules apply in addition to the rules on simplified invoices that came into force on 1 January 2013.

Unlike the rules governing simplified invoices, these rules are not based on the European Directive, and applying them to customers from another Member State may give rise to disputes.

[18] This approval was added in the decision of 10 October 2017, No. BLKB2017/7366 (addition to section 3.2.4).

[19] Pursuant to Article 15(5) of the Turnover Tax Act 1968, VAT levied on the supply of food and drink for consumption on the premises of a catering establishment to persons staying there for only a short period is not deductible.

[20] Section 34d of the Turnover Tax Act 1968, which provision came into force on 1 January 2013.

[21] This relates to the invoice amount including VAT.

[22] Section 35a(1) of the Turnover Tax Act 1968.

[23] Section 15 of the Turnover Tax Act 1968.

[24] Section 67ca of the General Tax Act.

[25] This is the maximum fine applicable in 2016. This amount is indexed every five years.

[26] Section 24b of the Tax and Customs Administration Administrative Fines Decree.

[27] In the decision of 10 October 2017, No. BLKB2017/7366, the passage (section 3.3.7) included in this regard in the decision of 6 December 2014, No. BLKB2014/704M, has been replaced.

[28] This concerns the judgements in the cases known as Senatex and Barlis 06.

[29] Section 27 of the Commercial Register Act 2007.

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