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Doing business in the Netherlands 35ExemptionsNot all goods and services in the Netherlands aresubject to VAT. The following services are VAT exempt:medical services, services provided by educationalinstitutions, most banking services, insurancetransactions, services performed by sports organizationsand property rentals. Companies that provideexempted services are not entitled to chargeVAT for their services. In addition, they are alsonot entitled to claim the VAT charged to them forgoods and services. Companies that perform bothVAT liable and VAT exempt services will assign VATto those specific services on which VAT is due.The VAT system in the internal European marketThe European Union has recognized the free trafficof goods, persons, services and capital in the EU.Performances within the European Community arereferred to as the intra-community supply andacquisition of goods and intra-community services.VAT is charged based on the destination countryprinciple. This means that goods that cross the borderto another EU country are taxed in the destinationcountry. For business to business services(B2B). The rule applies that these services are taxedin the country where the customer is established orhas a permanent establishment.VAT defermentThe Netherlands has implemented a so-called defermentsystem. This system offers cash-flow advantages.This system’s benefit involves payment of VAT to bemoved from the time of import to when the companydeclares taxes, usually monthly. The VAT due for theimport will be recorded in the declaration as payable,while at the same time, amounts will be subtracted aspre-paid taxes. To obtain this deferment, the importermust apply for a license at the tax department under“Article 23.” To obtain this license the company (importer)has to be registered for VAT in the Netherlandsas a domestic entrepreneur or as a foreign entrepreneurwith a permanent establishment for VAT inthe Netherlands. In addition this company (importer)should have regular imports to the Netherlands andthe bookkeeping is subject to meet specific requirements.Tax ratesThe general VAT tax rate is 21%. The Netherlandsalso has a low VAT rate of 6%. Goods and servicesfalling under the low tax rate are specified in Table1 of the Turnover Tax Act (Wet op de omzetbelasting1968). This applies, among other things, tofoodstuffs and medicines. The zero rate is mainlyintended for goods exported to outside the EU andfor goods exported to other EU members states.All companies are bound to submit VAT declarations.If the company also supplies goods or services toelsewhere in the European Union, it is also bound tofill in the ‘Opgaaf Intracommunautaire Prestaties’(Intra-Community Supplies) tax form.6.8 Excise and other duties and taxesExcise dutyThe Netherlands charges excise duties on alcohol-containingbeverages, tobacco, fuel and othermineral oils. Manufacturers, traders and importerspay excise duties to the tax authorities. The ExciseDuty Act (Wet op de accijns) in the Netherlands isfully harmonized with the applicable EU directives.Environmental taxesThe Netherlands charges the following environmentaltaxes:• Tax on mains water• Fuel tax• Energy tax• Waste taxTax on mains waterThe Netherlands charges tax on mains water. Allcompanies and households pay tax on a maximumamount of 300 cubic metres of water per connectionper annum. The rate is € 0.33 m 3 per up to 1 July2014. From 1 July 2014 on the rate is related to theamounts used, starting at € 0.33 and reducing up to€ 0.05) per m 3 .Fuel taxFuel tax is paid by the producers and importers ofcoal. The rate is € 14.27 (2014) per 1,000 kg coal.Energy taxThe purpose of energy tax is to reduce CO 2emissionsand to reduce energy consumption. The energytax is charged to the user of the energy (naturalgas, electricity and certain mineral oils). The ratesare related to the amounts used, whereby the ratesare progressively reduced as consumption increases.