Decision (EU) 2018/1904 authorising the Netherlands to introduce a special measure derogating from Article 285 of Directive 2006/112/EC on the common system of value added tax

Summary:

On 26 October 2018 the European Commission presented a proposal for a Council Decision authorising the Netherlands to introduce a measure derogating from Article 285 of the VAT Directive. The Council of the European Union adopted the Decision on 4 December.

Further information:

Under Article 285 of the VAT Directive, Member States may exempt taxable persons whose annual turnover does not exceed €5,000 from VAT. In July 2018 the Netherlands requested to increase the exemption threshold to €25,000 as of 1 January 2020.

According to the information provided by the Netherlands, their current system is of graduated relief for taxable persons who, on an annual basis and after deduction of input tax, are liable for no more VAT than €1,883. The process for granting graduated tax relief is complex, and contains a high level of error.

Due to the rapidly growing number of small businesses in the Netherlands, the operational costs for the Dutch tax authorities are increasing and the administrative burden for businesses is growing, while the financial interest involved remains low. The Netherlands, therefore, wish to modernise their system by introducing an optional turnover-linked VAT exemption scheme with an exemption threshold of €25,000. The measure would reduce VAT obligations for small businesses and simplify the collection of VAT for tax authorities.

This measure is in line with the scope of the proposal for a Directive on the special scheme for small businesses presented by the European Commission on 18 January 2018. It is therefore proposed to allow the Netherlands to increase the exemption threshold for SMEs from €5,000 to €25,000 until 31 December 2022.

Official

EUR-Lex: COM(2018)714: Proposal for a Decision authorising the Netherlands to introduce a special measure derogating from Article 285 of Directive 2006/112/EC https://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2018:714:FIN

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