The policy regarding VAT representation, which took effect on 25 December 2013, has been updated. Noteworthy is the decision of the State Secretary of Finance to provide new rules regarding financial security (bank guarantee). In some cases, the amount of financial security can be reduced by the tax authorities.
One of the main requirements to become a VAT representative or obtain an import VAT reverse charge license is (for foreign VAT entrepreneurs) to provide proof of financial security in the form of a bank guarantee or deposit. The updated resolution mentions that the amount of financial security is now held by a minimum and maximum threshold and is also subjected to the type of products handled by the represented party. As such, two categories of goods can be identified: Category 1 contains “semi-finished products” with a minimum/maximum threshold of EUR5,000 / EUR100,000. “Consumer products” are placed in category 2, with a minimum/maximum threshold of EUR5,000 / EUR500,000.
In principle, the amount of financial security is based on the average amount of VAT, which is reported quarterly, or, if this more substantial, the average of the VAT per month which is due in case the supply would not be VAT-exempt or would not fall under the VAT zero rate. For both categories, a percentage of 5 percent of the aforementioned amount is set, keeping in mind the new minimum and maximum thresholds. However, the final amount of financial security will be determined by the Dutch tax inspector, since attention is required in situations where there is potential high risk of VAT fraud. In this case, the tax inspector can raise the amount of financial security within its boundaries.
As a result of this update, previous settled financial securities could now deviate from the new standards. An adjustment according to the new standards may be issued by the inspector of the Dutch Tax Authority upon request. This also means that if the previous amount exceeds the maximum threshold, the amount of financial security can be lowered.