New VAT measures as a result of the coronavirus
Mr. Vijlbrief, the Dutch State Secretary for Finance, wrote a letter to Dutch Parliament yesterday to announce that additional temporary VAT measures will be put in place in the Ministerial Decree on corona related tax measures.
The (temporary) VAT measures are as follows:
- Wider application of the VAT exemption for the outsourcing of healthcare staff;
- Free provisioning of medical aids not subject to VAT; and,
- A reduced VAT rate when offering online sports lessons.
1. Wider application of the VAT exemption for the outsourcing of healthcare staff
The first temporary measure concerns the outsourcing of healthcare staff. The outsourcing of healthcare staff is, in principle, VAT taxable. This outsourcing can only be exempt from VAT under strict conditions. One of these conditions is that the provider applies the VAT exemption for healthcare to his primary activities. The State Secretary has now eased this condition, considering the fact healthcare staff are now increasingly being hired and seconded due to the corona crisis. The State Secretary has now approved that, with retroactive effect from 16th March 2020 to 16th June 2020, VAT will not be applied to the outsourcing of healthcare staff, regardless of who the provider is. This means that, in addition to VAT-exempt healthcare institutions, secondment and temporary employment agencies can, under certain conditions, outsource healthcare staff without VAT being charged during the corona crisis.
The conditions are as follows:
- The hirer must be a healthcare institution or care facility which applies the VAT exemption; and,
- The provider must state its invoice that it use this special approval and record details relating to the application of the approval in its administration; and,
- The provider may only charge the hirer with the gross salary costs, with the possible addition of an administrative cost reimbursement of a maximum of 5%; and,
- The outsourcing may not be subject to any intended or actual profit.
The State Secretary has also approved that this temporary VAT measure will not affect the provider’s right to deduct input VAT. This is favourable for providers who would normally provide services subject to VAT. They can now outsource healthcare staff without charging VAT, whilst still being able to continue to deduct any VAT charged on related purchases.
Free provisioning of medical aids not subject to VAT
The following temporary VAT measure concerns the free provisioning of medical aids to healthcare institutions, care facilities and GPs. This measure is necessary, as the VAT legislation sees the free provisioning of goods as a regular supply for consideration under certain circumstances. In that situation the supplier would need to charge VAT on the free delivery, whereby the VAT should be calculated on the purchase price of the goods. Healthcare institutions, care facilities and GPs can’t deduct the VAT charged by the supplier, resulting in the VAT increasing their cost price.
The State Secretary has approved - with retroactive effect from 16th March 2020 to 16th June 2020 - that the supplier will not need to pay any VAT on the free provisioning of medical aids to healthcare institutions, care facilities and GP’s. The State Secretary has also indicated that this free provisioning will not have any (negative) consequences for the applicable supplier’s VAT deduction where this temporary VAT measure is concerned. This means the supplier can continue to deduct VAT on costs, without having to take the free provisioning into account.
A reduced VAT rate when offering online sports lessons
The final VAT measure concerns a temporary approval - with retroactive effect from 16th March 2020 until such time as compulsory closures are lifted - to allow for the reduced VAT rate to be applied to the online offering of sports lessons.
Many gyms (and similar businesses) are currently offering online sports lessons where people are needing to stay at home as much as possible and gyms have been instructed to close their doors. Normally the standard VAT rate applies to online sports lessons and the reduced VAT rate applies to regular (not online) sport lessons. The State Secretary has approved for the reduced VAT rate to now also apply to situations where sports lessons are being offered online as a result of the coronavirus, until such time as the compulsory closures have been lifted.
Do you have any further questions as a result of the introduction of these temporary VAT measures? Then please get in touch with our colleagues in Baker Tilly’s VAT & Customs Advisory team.