The European Commission had remarked that the application of the zero VAT rate (exemption with credit) in the Netherlands for seagoing vessels was too broad. Therefore, in 2017, the Dutch Government announced that Dutch VAT legislation for the application of the zero VAT rate for (supplies to) seagoing vessels would be amended with effect from 1 January 2018. Under the old legislation, seagoing vessels did not actually have to navigate on high seas, they only needed to be capable of doing so. Under the new legislation, the definition of a seagoing vessel is stricter. After consultation with the maritime sector, the changes were postponed until 1 January 2019. In November 2018, the Deputy Finance Secretary issued an explanatory decree to provide some guidelines.
From 2019, the zero VAT rate can only be applied if the vessel (a) operates at 70% or more on high seas and (b) is 100% used commercially.
The vessel not only needs to be able to operate on high seas (outside the twelve-mile zone) but must actually do so for at least 70% of the distance or time sailed.
If a vessel is registered with the International Maritime Organization (and thus has an IMO number), it is assumed that it is capable of operating on high seas. Vessels that are not mandatorily registered with the IMO must provide other proof, e.g. a certificate of registration for the vessel.
The operator may calculate actual usage based on information from the previous year on (a) distance sailed, (b) number of voyages or (c) operating time. The operator may also use the weighted average of the previous five years for one of the three methods.
Commercial use is defined as passenger transport (not yachts) or industrial, trading or fishing activities. The zero VAT rate cannot be applied if the vessel is also used for private purposes (for example captain’s leisure trips).
When goods and/or services are provided to the operator of the vessel, it must be determined whether the zero VAT rate can be applied. To this end, a statement must be provided by or on behalf of the operator to the supplier confirming that the vessel meets the 70% and 100% criteria. It is sufficient to provide this statement once a year. However, this statement does not automatically exonerate the supplier in the event of the zero VAT rate being used incorrectly. The decree provides an example case of the zero VAT rate being applied to a yacht where it is not apparent that the criteria for the zero VAT rate have been met. Use of the zero VAT rate can also be denied in cases of fraud.
The Global VAT Newsletter focuses on changes in compliance duties in various EU and non-EU countries
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