Don’t miss the boat: pay attention to the adjustments in the last VAT return for 2020 and the favorable Supreme Court judgment on the recovery of VAT on accommodation expenses

The renewed DED memorandum was recently published, which also includes some important developments for the Shipping & Offshore industry.  In this article we would like to explain the most important developments for the industry.

Adjustments in the last VAT return

In the last VAT return for the financial year (for most VAT taxable persons the Q4 2020 or December 2020 return) the following adjustments may have to be made:

1. The VAT on staff benefits and promotional gifts that was previously recovered under the VAT Deduction Exclusion Decree (‘DED’), if the amount of the benefits per employee/beneficiary exceeds the threshold of EUR 227 (exclusive of VAT) per year.
2. The Cafeteria Scheme
3. The private use of the company car

Our updated DED memorandum with its clear step-by-step plan immediately shows how this will impact your organization!

Favorable Supreme Court judgment on accommodation expenses

Although the aforementioned adjustments mainly result in the payment/adjustment of (previously recovered) VAT, a recent judgment by the Supreme Court offers scope for a broader interpretation of the recovery of VAT on accommodation expenses.

In the maritime industry, it is customary for expenses to be incurred for ship’s crews and personnel in order to provide them with permanent or temporary accommodation, on the Dutch mainland. As a rule, the initial recovery of VAT on goods and services used for (VAT-taxed) business purposes is permitted (provided the VAT taxable person has, for example, the correct invoice for this). However, discussions often arise about whether a DED adjustment must subsequently be made to correct the previously recovered VAT. In principle, staff accommodation expenses fall under the scope of the DED. Moreover, the threshold of EUR 227 for such expenses (together with the other benefits paid to staff during the year) is quickly exceeded.

On November 13, 2020 the Supreme Court rendered a judgment that may allow more scope for VAT recovery (and thus sidelines the DED). In its judgment, the Supreme Court specifically concluded with regard to such accommodation expenses that if there is a more compelling reason that is in the best interests of the company and this outweighs the private nature of these costs, then there is indeed a VAT recovery right and no DED adjustment has to be made. What a more compelling reason in the best interests of the company is, is difficult to assess. There must be a special circumstance if accommodation expenses are to be incurred in the best interests of the company. This may be the case, for example, if a VAT taxable person cannot find any employees on the Dutch labor market or if foreign employees will only come to the Netherlands if they are provided accommodation. This is not inconceivable in respect of recruiting maritime personnel and workers for shipyards and is even essential if sufficient qualified personnel are to be found. The costs incurred for this may then be regarded as a special circumstance in the best interests of the company, which means the DED does not apply. It is therefore good to examine your company’s rationale and/or conditions for the accommodation expenses that are paid to (insourced) personnel and to establish whether these are essential for finding sufficiently qualified personnel.

More information or advice?

We would of course be happy to help you look into the possibilities of recovering VAT and the correct and best way to make the DED adjustments. Please contact one of our specialists for more information or advice.