Netherlands | Application of Zero-Rate to Seagoing Vessels Restricted from January 2019

As of 1st January 2019, changes to the scope of the application of the zero rate of VAT for certain supplies and the provisioning of seagoing ships, and connected services to such seagoing ships will come into effect.

Examples of impacted businesses will include those involved in supplies of ships used for passenger and freight transportation and fishing activities.

Under current Dutch VAT law, any ship defined as a “seagoing vessel” qualifies for the zero VAT rating. This is inconsistent with the corresponding provisions in the EU VAT directive, which prescribe that such vessels must also be “used for navigation on the high seas”.

Heeding the Commission’s warning to amend its legislation so that it complies with EU law, the Netherlands recently published new rules which clarify that a seagoing vessel may only benefit from the treatment if it satisfies the following criteria:

  • The seagoing vessel’s sole use must be for business purposes; and
  • At least 70% of the seagoing vessel’s use must be for journeys on the high seas.

What this means is that certain supplies of ships and connected services, which presently enjoy the zero rate of VAT (for example, certain ferry and yachting services) may be taxed at the standard 21% VAT rate from next year.

The Dutch Ministry of Finance initially proposed this amendment as part of its 2018 Tax Plan, but further to consultation with the maritime industry, the changes were postponed until 2019.

It is important for businesses operating in this sector, to determine whether they may still apply the zero rate to their transactions.  This is so the correct rate of VAT is accounted for and any contracts amended accordingly

If you believe your business may be affected by the above developments, please do get in touch, to discuss how we can help you.