Longer period for an ex officio refund when the distance sales threshold is exceeded

Businesses that spot the € 10,000 threshold too late pay foreign VAT and want the Dutch VAT back. Differences in assessment periods could result in double taxation. A new concession resolves this.

A business established in the Netherlands that sells goods or digital services to consumers in other member states, for example through its webshop, must in principle charge foreign VAT. Since 1 July 2021 a threshold of € 10,000 per calendar year applies. Before that date, distance sales were subject to different and usually higher thresholds that varied from member state to member state. The threshold avoids foreign registration and filing obligations for businesses making only limited cross-border supplies to consumers.

Exceeding the threshold

A business established only in the Netherlands may charge Dutch VAT for as long as it does not exceed the threshold in the current calendar year and did not exceed it in the preceding one. Where it exceeds the threshold during the year, it must charge foreign VAT from the transaction that takes it over.

In practice, businesses regularly discover the breach too late and have wrongly charged Dutch VAT at 21% or 9%. They must then register in the member states concerned and account for the VAT there. It also happens that the foreign tax authorities spot the breach and raise an assessment. Failing to declare and pay on time can also attract penalties and interest.

Differences in assessment periods

The business may reclaim the Dutch VAT wrongly paid, but a request for an ex officio refund is subject to a five-year limit. The request can cover at most the five calendar years preceding the year in which it is made. An inspector receiving such a request in 2025 may therefore, under current policy, only refund VAT relating to the period from 1 January 2020.

That five-year period derives from the Dutch assessment period, but assessment periods are not the same across the EU. Some member states apply a longer period, for instance seven years. That difference produces double taxation for the years in which the business has to pay foreign VAT but can no longer recover the Dutch VAT it accounted for.

The concession

The recently updated decree on administrative obligations for VAT contains a concession for this risk. Where the threshold has been exceeded, the inspector may refund the VAT wrongly paid for the whole period covered by the foreign assessment.

The concession applies from the entry into force of the decree on 9 May. In our view it is in some circumstances possible to rely on it even where a refund has already been granted, provided the foreign assessment period has not yet expired.

An example. A Dutch business receives an assessment from a foreign tax authority at the start of 2025 covering the period 2018 to 2024. In 2025 it obtains a refund of the Dutch VAT wrongly paid from 1 January 2020. In our view it can rely on the new policy in 2025 to recover the Dutch VAT paid in 2018 and 2019 as well, because at the time of that further request the foreign seven-year period has not yet expired.