How does VAT work?

In the Netherlands, consumers pay value added tax (VAT) on all goods and services they buy. VAT is included in the price. The consumer pays the VAT to the trader, who then remits it to the Tax and Customs Administration.

Calculating VAT

VAT is calculated according to the value of a product or service, not the quantity (in contrast to excise duty). For example, when a trader wants to sell a bicycle, he first calculates the selling price of the bicycle without VAT. He then multiplies the selling price by the VAT rate to calculate the amount of VAT to charge. He adds this to his selling price, giving the price the buyer actually pays. After the bicycle is sold, the trader remits the VAT to the Tax and Customs Administration.

When does the consumer pay VAT?

VAT is levied on goods and services. This can happen at any stage of the supply chain, from raw material to end user. There are five actions which attract VAT:

  • importing goods;
  • traders buying goods from another EU member state;
  • consumers buying new or nearly new transport equipment from another EU member state (motor vehicles, ships/boats and aircrafts);
  • supplying goods (such as objects or electricity);
  • traders supplying services.

See also

Ministry responsible