In the End-of-year scheme 2024 includes the VAT revision on investment services. This scheme, which was also previously the subject of an internet consultation, is intended to take effect from 1 January 2026.
VAT deduction
The (extent of) VAT deduction on purchased goods and services is determined in the year of entry into service. Regarding purchased goods, in the 4 (movable goods) and 9 (immovable goods) years following the year of entry into service, respectively, it is assessed whether in those years the (degree of) deduction deviates from the year of entry into service. This may result in additional deduction, but also in the refund of (part of) the deducted VAT to the Tax Authorities.
For services Dutch VAT legislation has no such revision scheme. As a result, the (extent of) VAT deduction on purchased services is definitively fixed after the end of the year of commissioning of those services.
Conversion
Services are all services that are not supplies of a good. A good is defined in VAT as: “material objects susceptible to human control, as well as electricity, gas, heat or cold and the like”. The conversion of real estate often qualifies as a service. This is only different if the conversion leads to the manufacture of a new immovable property, which, according to the Supreme Court, is only the case if “in fact, there is new construction”.
As a result, large and costly renovations often do not qualify as the supply of a good, but as a service. In that case, the use in the year the remodelling was put into use is decisive for the (degree of) deduction of the VAT charged on the remodelling. If the building is used in the year of occupation for VAT-taxed transactions, the VAT is fully deductible. Subsequent non-taxed use does not result in the deducted VAT having to be (partly) refunded.
As a result, many converted properties are first used for VAT-taxed short-stay rentals only to be let on a regular, VAT-exempt basis after some time anyway. A line is being drawn through this tax-saving set-up with the introduction of the revision scheme on services.
Review on investment services
Under the proposed scheme, the (extent of) VAT deduction on investment services will be reviewed when the use changes in the 4 years following the year of commissioning (i.e. it does not follow the review period for real estate). However, a threshold of €30,000 per investment service applies. VAT on investment services up to this threshold does not need to be revised.
A feature of an investment service is that it is of a durable nature. It involves services to immovable property, such as renewing, enlarging, repairing or replacing and maintaining it.