Netherlands: Standard VAT Rate to Apply on Short-Term Rentals

September 3, 2024

The Netherlands' hotel industry and accommodation service providers are on the brink of significant changes. The new Netherlands government (Dutch Cabinet), formed in July this year, is set to propose changes to the VAT rate applicable to accommodation services as part of the Budget Day presentation for the tax plan for 2025. This could have a profound impact on the industry.

Application of Standard VAT Rate

A reduced VAT rate of 9% is applied to short-term accommodation services by hotels, guesthouses, and camping sites for short-term rentals. It is important to remember that according to Dutch regulations, short-term rental can last up to 6 months. Once this period is exceeded, the landlord can prove that the rental is still “short-term” and that guests do not live there permanently. If they do not prove this, the reduced rate of 9% can not be applied.

Although the proposal met with great resistance, even protests, the new Dutch government is determined to increase the VAT rate for accommodation services from 9% to a standard 21%. Camping sites will be the only accommodation service exempt from these new VAT rules, and a 9% VAT rate will continue to apply to those services.

In addition to short-term rental services, the Dutch Cabinet plans to increase VAT rates for books, sports events, festivals, and other cultural events, with cinemas exempt. As with accommodation services, the standard VAT rate will also apply to these sectors.

Budget Day is scheduled for September 17, 2024, and it remains to be seen whether the Dutch Cabinet will persist in increasing VAT rates. If the new VAT rates are imposed, they will come into force in 2026.

Conclusion

The decision to increase VAT rates for several sectors has sparked concerns among sector representatives. They fear that this increase could lead to a decrease in consumer spending, with fewer people buying books, going to hotels, and visiting sports and cultural events.

As Budget Day approaches, pressure to avoid imposing new VAT rules rises, and the final decision of the Dutch Cabinet is expected with great impatience.

Source: PwC, Fiscaal Vanmorgen, Dutch Tax Authority

What is the current VAT rate for short-term rentals in the Netherlands?

As of now, short-term accommodation services provided by hotels, guesthouses, and camping sites are subject to a reduced VAT rate of 9%. According to Dutch regulations, a short-term rental is defined as a stay lasting up to six months. If this period is exceeded, the landlord must prove that the rental remains "short-term" and that guests do not reside there permanently to continue applying the reduced rate.

What changes to the VAT rate for short-term rentals has the Dutch government proposed?

The new Dutch government, formed in July 2024, has proposed increasing the VAT rate for accommodation services from the reduced 9% to the standard rate of 21%. This change is part of the tax plan for 2025 and is expected to be presented on Budget Day, scheduled for September 17, 2024. If approved, the new VAT rates would come into effect in 2026.

Will any accommodation services remain at the reduced VAT rate?

Yes, camping sites are expected to be exempt from the proposed VAT increase. They will continue to benefit from the reduced VAT rate of 9%, even if the proposed changes are implemented.

How might the proposed VAT increase impact other sectors?

In addition to short-term rental services, the Dutch Cabinet plans to increase VAT rates for books, sports events, festivals, and other cultural events, applying the standard 21% rate to these sectors. However, cinemas are expected to be exempt from this increase and will continue to enjoy the reduced VAT rate.

What are the concerns associated with the proposed VAT increase?

Sector representatives have expressed concerns that the increased VAT rates could lead to a decrease in consumer spending. They fear that higher costs may deter people from purchasing books, staying in hotels, and attending sports and cultural events, potentially impacting these industries negatively.

When will the final decision on the VAT rate changes be made?

The final decision is expected to be announced on Budget Day, scheduled for September 17, 2024. If the Dutch Cabinet proceeds with the proposed VAT increases, the new rates would come into effect in 2026.

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