The Dutch Senate passed the Act on Additional Tax Measures to Increase Purchasing Power 2022 on 28 June 2022. The Act governs the temporary reduction in the VAT rate on energy (natural gas, electricity, and district heating) from 21% (general rate) to 9% (reduced rate). The Act is effective from 1 July 2022. The reduced VAT rate will be applied to the supply of natural gas via the natural gas system, the supply of district heating via a heating network and the supply of electricity via the electricity grid up to and including 31 December 2022, and will apply to supplies during this period only.
The objective of the Dutch government with the temporary reduction of the energy tax is to counteract the negative effects of the current energy crisis on consumers. It can be likened to a type of compensation for the high price of gas in the Netherlands.
Additionally, as a temporary measure, the excise duty on unleaded petrol, diesel and liquefied petroleum gas (LPG) will also be reduced retrospectively by 21% from 1 April 2022. Applications for refunds where fuels are concerned that were already on the Dutch market for commercial purposes as at 1 April 2022 will be accepted by the Dutch Tax and Customs Administration.
Consumers and suppliers need to take note of the effects and practicalities of the Act. Edwin van Houten, Director of ACM’s Consumer Department stated the following: “The temporary VAT reduction has been introduced to provide partial relief to consumers for their high energy bills. It should therefore be clear to consumers what this VAT reduction means for their pocketbooks. Consumers therefore need to be made aware of the VAT reduction very clearly, for example, in a reduction of their monthly payments.”
Effectively, supplies will have to be broken down by deliveries pre and post 1 July 2022 on the final invoice for the year. Invoices for the temporary reduced period must state the correct VAT rate and the right amount in VAT must be remitted to the Dutch Tax and Customs Administration. Incorrect invoiced VAT (i.e. at a rate of 21% rather than 9%) is not deductible as input tax in principle, therefore it is of utmost importance to thoroughly check invoices for energy supplies to ensure that the correct rate was applied.
The general rule is that the invoice date will determine the VAT rate that is in effect at that date. Under the new legislation the supply date rather than the invoice date, determines the VAT rate. This means that any payments invoiced or received outside the period from 1 July to 31 December 2022 that relate to supplies within that period will be subject to the 9% VAT rate. This includes prepayments towards supplies within that period. The contrary will also be applicable: the rate of 21% is applicable to all payments invoiced or received within the period from 1 July to 31 December 2022 for supplies before 1 July 2022 or after 31 December 2022.
The Netherlands Authority for Consumers and Markets (ACM) emphasizes that suppliers of energy must inform buyers in a clear, concise and transparent manner about the temporary VAT reduction on natural gas, electricity, and heat. They also points out the suppliers should not use the VAT reduction for offering “temporary rock-bottom deals” as the purpose of the temporary VAT reduction is to compensate consumers for the increased energy costs.
To conclude it is noteworthy to point out that landlords who supply energy to their commercial tenants should take the temporary VAT reduction into account and that the supply of electricity for charging electric vehicles is also subject to the 9% rate if the costs are recharged in the chain. The VAT reduction results in a lower kWh price inclusive of VAT which in turn leads to a price increase for motorists who are not in a position to deduct all or part of the VAT on car expenses as input tax. If you are entitled to deduct input VAT as a recipient it is important that your invoice displays the correct VAT amount as incorrectly calculated VAT is not deductible.
Sources:
https://www.acm.nl/en/publications/acm-suppliers-must-be-clear-about-effects-vat-reduction-energy
https://meijburg.com/news/temporary-reduction-excise-duties-fuel-and-vat-energy
https://www.bdo.nl/en-gb/insights/reduced-vat-rate-for-energy-pay-attention-to-correct-invoicing