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

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