Netherlands VAT Zero-Rate Case: Impact on Non-Resident Alcohol Wholesalers

The District Court in the Hague decided on a case concerning the non-resident wholesaler of alcoholic beverages without fixed establishments in the Netherlands. The wholesaler applied a zero VAT rate to its supplies, which became the subject of dispute between the wholesaler and Dutch Tax Authorities.

The case refers to the obligations of appointing a tax representative, applicable VAT rates, and the relationship between national VAT law and the EU VAT Directive.

Facts of the Case and Court Decision

The alcoholic beverages are stored at and sold from a third-party excise goods warehouse and customs warehouse before the wholesaler sells them to customers. After the Tax Authority conducted the tax assessment of non-resident wholesalers that is registered in the Trade Register of the Chamber of Commerce in the Netherlands, it assessed that the wholesaler is considered a foreign taxable person for turnover tax purposes, the wholesaler submitted a VAT return with zero VAT rate applied to supplies.

Following the submission of the VAT return, the Tax Authority informed the wholesaler that, because it is a foreign taxable person and did not appoint a tax representative, it wrongly applied the zero rate in the VAT returns for the supply of excise goods because.

In addition to this, the Tax Authority requested additional information. It imposed an additional turnover tax assessment, which led to the imposition of EUR 627,176 due to taxes and interest for 2018 and EUR 898,798 for 2019.

After the wholesaler objected, the additional taxes and interest charged were reduced. However, the dispute remained about whether the Tax Authority correctly applied the VAT rate in the tax assessment and whether the wholesaler met the requirements under VAT law to appoint a tax representative.

The District Court in the Hague determined that the wholesaler was not established in the Netherlands and had to appoint a tax representative to apply the zero VAT rate. Moreover, the Court determined that these requirements are reasonable, not disproportionate, and do not violate Article 204 of the EU VAT Directive.

With that in mind, the Court ruled that the wholesale appeal was unfounded. The imposed tax assessments conducted by the Tax Authority were correct. Since it failed to appoint a tax representative, it could not apply a zero VAt rate on its supplies of alcoholic beverages.

Conclusion

The wholesaler still has a right to appeal to the Court of Appeal in The Hague against this decision within six weeks of publication date. Whether or not the wholesaler will exercise its right to appeal it remains to be seen. However, the case and decision presented provide essential information and clarification on VAT rules applicable to foreign taxable persons.

Source: The Hague District Court - Case AWB - 23 _ 2431