Fiscal Solutions

General fiscal representation (GFR) is often applied in cases where limited fiscal representation (LFR) is not legally possible, such as when purchasing goods from other EU Member States.

General Fiscal Representation For Businesses

General Fiscal Representation is often applied when Limited Fiscal Representation is not legally possible, for example in the case of purchases of goods from another EU Member State. Also with General Fiscal Representation, a company does not have to legally establish itself in the Netherlands.

Article 23: Reverse-Charge Vat Authorization

Many of the companies that register for VAT in the Netherlands also want to import goods from outside the European Union. This is always possible, but the tax authorities do not grant an Article 23 permit for the reverse charge of VAT on imports to non-Dutch companies. This means that a general fiscal representative must be appointed.

Any Dutch business can act as a general fiscal representative; however, because import always involves movement in terms of logistics, it is often customs agents and logistics companies that act as general fiscal representatives. Accountants will also often act as general fiscal representatives. A general fiscal representative is responsible for all transactions carried out by the company represented in the Netherlands.

Only once a general fiscal representative has been appointed will the tax authorities grant the VAT number an Article 23 permit.

Guarantee Deposit

The general fiscal representative must provide surety to the Dutch tax authorities and is liable for the maximum amount of the surety per year. But because the tax authorities can make a revised assessment going back five years, the liability of the representative is actually five times the amount of the surety. In general, the representative will therefore also ask its foreign client for a surety of five times the deposit that they need to pay to the tax authorities. The amount of the surety that the tax authorities request from the representative is laid down by law. The amount of VAT that the foreign company is expected to owe in a quarter must be guaranteed by the representative.

Customized Service

A general fiscal representative has to apply for a specific authorization for the company that they are representing. A complete and comprehensive VAT administration must be kept and, combined with the application process and liability, means general fiscal representation is significantly more labor-intensive than limited fiscal representation. The VAT number also allows for sales within the Netherlands and for the deduction of input tax. It is clear that GFR offers many possibilities for logistics and the administrative process, but it does mean that the organization becomes far more detailed and the obligations become more intensive and prolonged.

While LFR has become common practice in the Netherlands, GFR still requires customization. This also carries the risk that the procedures and obligations related to GFR are underestimated, resulting in extensive liability claims both for the fiscal representative and for their client.

Limited Fiscal Representation

Under certain conditions, import VAT does not need to be paid on goods imported into the Netherlands. This Dutch system can be used by businesses in other EU Member States or non-EU Member States to not pay import VAT.

Import VAT needs to be paid on imports into most of the EU Member States. However, the importer can reclaim this VAT from the Dutch Tax and Customs Administration. Under certain conditions, import VAT does not need to be paid on goods imported into the Netherlands. This Dutch system can be used by businesses in other EU Member States or non-EU Member States to not pay import VAT, creating improved liquidity.  Clearing goods with limited fiscal representation has another important advantage: the goods are released after the import declaration and may be transported without supervision by the customs authorities. The saying ‘Logistics leads Customs’ is then fully accurate.

Limited fiscal representation (LFR) can be applied to the import of goods into the Netherlands which are destined for businesses located in another Member State. For example, if a German importer imports goods via Hamburg, they have to pay German import VAT which can be reclaimed afterwards. But, if these goods enter the EU through Rotterdam, the German importer does not need to pay import VAT.  Instead, the VAT is settled between the customs broker who makes the import declaration in Rotterdam and the German importer.

Vat Obligations

All import duties and other VAT obligations are payable when submitting an import declaration with LFR. However, the VAT obligations are taken over by the limited fiscal representative making them responsible and liable for VAT upon importation. Once the import declaration has been made, the goods count as free goods without customs obligations and can be transported to Germany without customs interference, lending greater flexibility to the logistics process. The limited fiscal representative must now deliver the goods to the German importer for VAT purposes, which means that they must meet all the obligations associated with an Intra-Community supply from the Netherlands to Germany.

Authorization

The limited fiscal representative must be authorized to act as a limited fiscal representative. This authorization is usually granted by the German importer but can also be issued by the seller from the USA. Subsequently, the customs agent must check the VAT number of the person or business who bought the goods. The limited fiscal representative must then include the supply subject to VAT in the monthly listing and report all necessary data to Statistics Netherlands on a monthly basis. The limited fiscal representative therefore acts as if they are selling the goods into Germany themselves.

Licences

To act as a limited fiscal representative, the business must have the necessary licences and authorizations. The vast majority of LFR licences are issued to customs brokers, as the use of these authorizations is linked to an import declaration which, in the Netherlands, is generally drawn up by customs brokers. These licences are issued by the tax authorities and not by the customs authorities.  One of the licensing conditions is that a surety is issued by the licensee to the tax authorities to cover any amounts to be claimed, as the tax authorities want to be sure that they can collect any tax due from the limited tax representative.

The liability of the fiscal representative is limited to the VAT on the import transactions. However, the representative can make as many declarations as they want, making them liable without limitation. This means that they must therefore also pay if a VAT claim is higher than the deposit provided.  The tax authorities check whether the licence and authorization are correctly observed. These checks mostly result from signals from other EU Member States that give the Dutch tax authorities cause for further investigation.  For example, there might be mismatch in the VAT Information Exchange System (VIES) between the details of deliveries to a company and the declarations of acquisitions by the purchasing company.

This mismatch can then only be clarified by carrying out an investigation at the buyer’s and seller’s premises.  In many cases, the mismatch is due to an administrative error or chain transactions that have been incorrectly entered and settled.  But as fraud may also occur, it is important for the limited fiscal representative to have their administration, so that they are always able to prove the correct delivery of the goods and clear themselves from liability.

Competitive Advantage

Limited fiscal representation (LFR) can be used in all European Member States. But because the Netherlands is a transit country, we benefit all the more – especially in the case of transit to Germany.  If goods for a German importer are imported directly into Germany via Hamburg, the importer has to pay VAT. But, if these goods enter the EU through Rotterdam, the German importer does not need to pay import VAT, giving them significantly improved liquidity.

As a result, many non-Dutch companies that transport goods via the Netherlands make use of LFR, as it offers improved liquidity and logistical flexibility.  But Germany also makes use of LFR in the port of Hamburg for the transit of goods to countries such as Poland.  What makes the Netherlands and Belgium unique, however, is that goods can be distributed and kept in stock under LFR.  Many internationally operating companies choose to have their European import, storage, and distribution run via the Netherlands using LFR.

An additional advantage for many is that it is not necessary to legally establish themselves in the Netherlands, while trade and logistics can still be organized flexibly and reliably.