Narrower scope of 6% VAT rate on “medicine”

Under the Dutch VAT Act, certain pharmaceutical products - such as products that qualify as a “medicine” under the Dutch Medicine Act- are subject to the 6% reduced VAT rate. Under the Dutch Medicine Act, the qualification as “medicine” i.a. depends on whether a product is presented to consumers as “medicine”. In 2016, the Dutch Supreme Court has ruled that toothpastes that contain sodium fluoride as well as sunscreens with UVA and UVB filters can qualify as “medicine” for the purpose of the 6% reduced VAT rate. The question arose whether this judgment opened the doors for other products such as cosmetic products to fall inside the scope of the 6% reduced VAT rate.

As from 1 January 2018, the scope of the VAT reduced rate for “medicine” will be limited to products for which a (parallel) trade license has been granted by the Dutch Medicine Authority or to products that are explicitly exempt from such a license on the basis of the Dutch Medicines Act. The envisaged aim of this measure is to ensure that the 6% reduced VAT rate only applies to products that are considered “medicine” according to societal views.

Adjustment of VAT rate provisions in relation to sea vessels

The definition of “sea vessels” for the purpose of the Dutch VAT zero rate provisions will be adjusted in order to be in line with the EU VAT Directive. Following feedback from the European Commission on the definition applied by the Netherlands, it will now also be a requirement that sea vessels are actually used for navigation on high seas to qualify for the Dutch VAT zero rate provisions.

Liability for VAT on foreclosure sales

A specific liability will be introduced for the VAT due on foreclosure sales. The party triggering such sale (like a mortgagee, pawnee or someone with an enforcement order) will be liable for the VAT on such sale when this amount is not received by the tax authorities in time.

Agriculture: VAT Flat Rate Scheme Abolished

The current - optional - VAT flat rate regime for the agricultural sector will be abolished as of 2018. Transitional measures will apply.