KOR and International VAT: The Obligations That Don’t Disappear

In the previous article, KOR Turnover Explained: What Counts Towards the €20,000 Limit? we looked at which revenue counts towards the KOR threshold, and which does not.

A common misconception is that joining the KOR means you no longer need to think about VAT at all.

For most small service-based businesses, the KOR significantly reduces VAT administration. You do not charge Dutch VAT, you do not file regular VAT returns, and you cannot reclaim VAT on your costs and investments.

However, certain international and exceptional transactions can still create VAT obligations.

What Does the KOR Actually Exempt?

If you participate in the KOR:

• You do not charge Dutch VAT to your customers.
• You do not submit regular Dutch VAT returns.
• You cannot reclaim VAT on your costs and investments.

For most coaches, consultants, freelancers and other service providers, that is where the VAT administration ends. For more detail, read the previous article about the KOR rules.

However:

The KOR does not change the VAT rules that determine where a service is taxed.

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Selling Services Abroad

For many service-based businesses, services supplied to private individuals abroad are treated much like services supplied to Dutch private customers.

The KOR still applies, no Dutch VAT is charged, and there is usually no additional reporting obligation simply because the customer is located in another country.

Services supplied to businesses are different.

For example, if a Dutch consultant provides services to a company in Hungary or the United States, the service is often taxed in the customer’s country rather than in the Netherlands.

In many situations:

• You do not charge Dutch VAT.
• The customer accounts for VAT or a similar indirect tax locally.
• Additional invoicing requirements may apply.

For customers within the European Union, specific EU reverse-charge and invoicing rules often apply.

The KOR does not change these international VAT rules.

Situations That Can Still Trigger VAT Obligations

Although most KOR participants rarely need to submit an incidental VAT return, some specific transactions can still trigger VAT reporting obligations.

Examples include:

• VAT revision on previous investments.
• Purchases of goods or services that are subject to a reverse-charge mechanism.
• The sale of business property previously used in the enterprise.
• Buying or selling a new or nearly-new vehicle within the EU.
• Certain imports.
• Specific intra-EU purchases of goods.

The exact treatment depends on the type of transaction and the VAT rules that apply.

Reverse-Charged Purchases

A reverse-charged purchase occurs when VAT is shifted to the customer instead of being charged by the supplier.

If a transaction is subject to a reverse-charge mechanism:

• The VAT may still need to be reported in the Netherlands.
• The VAT may still need to be paid.
• Because you participate in the KOR, you generally cannot deduct that VAT as input VAT.
• If you do not submit regular VAT returns, an incidental VAT return may be required.

For many KOR entrepreneurs, this situation never occurs. However, if you receive an invoice stating that VAT has been reverse charged, it is worth checking whether additional reporting obligations apply.

What About Webshops and Online Sellers?

This article focuses primarily on service-based businesses where a person delivers the service.

If you sell goods, software subscriptions, downloadable digital products or other largely automated online services to consumers in other countries, additional VAT rules may apply. Depending on the circumstances, you may need to consider the distance-selling rules and the One Stop Shop (OSS) scheme.

These topics fall outside the scope of this article and should be reviewed separately.

Other KOR Topics

International VAT is not the only exception to the simplified KOR rules.

If you previously reclaimed VAT on significant investments before joining the KOR, VAT revision rules may apply and part of that VAT may need to be repaid.

We’ll cover VAT revision in a separate article:

KOR and Previous Investments: When Must You Repay Deducted VAT?

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Key Takeaway

The KOR removes most VAT obligations for typical small businesses.

However, it does not automatically remove:

• International VAT rules.
• Reverse-charge transactions.
• VAT obligations relating to certain imports and intra-EU transactions.
• Incidental VAT returns that remain required in specific situations.

For many entrepreneurs, these situations never arise. But if you buy or sell across borders, purchase goods internationally, make significant investments, or receive a reverse-charged invoice, it is worth checking whether additional VAT rules still apply.

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Next Step

Now that you understand:

• how the KOR works;
• which revenue counts towards the €20,000 threshold; and
• which VAT obligations may remain;

the next question is:

Is the KOR actually worth it for your business?

In the next article, “KOR Decision Guide: How to Calculate Whether It Saves You Money”, we’ll compare three practical examples and calculate when the KOR is likely to be financially beneficial and when it is not.

Frequently Asked Questions

General information, not tax advice. I am not a tax adviser (belastingadviseur); for your own situation, consider asking a qualified one.