News item | 05-03-2024 | 16:33
Under the current VAT regulations it is possible to do so by means of a so-called “short stay structure” save taxes. For example, by renting out homes subject to VAT for a short period after a major renovation, an entrepreneur may deduct the VAT on this renovation. If the entrepreneur then proceeds to VAT-exempt residential rental, the right of deduction remains intact. This leads to an uneven playing field in the rental sector. The government considers this undesirable and is therefore introducing draft regulations to combat this structure. That concept is now out for consultation so that comments can be made.
It is proposed to expand the revision scheme that already applies to (im)movable capital goods, such as laptops and buildings, to services to immovable property of at least € 30,000, such as renovations and major maintenance. The entrepreneur must keep track of whether the initial VAT deduction needs to be corrected for four years. The previously applied VAT deduction is therefore compared in each year (each for 1/5 part) with the use of the service (for taxed or exempt services) in that year. This makes the unwanted tax-saving structure with short-term rental much less attractive, creating a more level playing field for real estate entrepreneurs.
Previous proposal: review period on valuable services
A similar bill was already consulted in 2017. At the time, the proposal was not pursued, partly due to the reactions. At the time, there was mainly criticism of the great complexity and broad scope of operation. That is why this new measure focuses on services to immovable property above a threshold amount of € 30,000 and a transition period is also proposed.
Transitional arrangement
The proposal includes transitional law in the form of a postponed entry into force as of January 1, 2026. This gives the sector one year to prepare for the measure after the measure comes into effect.
Internet consultation and stakeholder meeting
To ensure that as many stakeholders as possible can provide input on this bill, the Ministry of Finance will start an internet consultation that will run from March 5 to April 2, 2024. The internet consultation can be found here: Overheid.nl | Consultation on VAT revision for immovable property services (internetconsultatie.nl) The input from the internet consultation will be included in the final elaboration of the regulations. If the consultation reveals any unforeseen or unintended effects, this may be a reason to adjust or reconsider the proposal.
Following the internet consultation, a stakeholder meeting is planned in The Hague on April 12, 2024. During this meeting, parties will have the opportunity to further explain their position. If you wish to be invited to this meeting, we ask you to make this known during the internet consultation.