Dutch Court of Appeal rules that Dutch legal obligation to appoint a fiscal representative for applying a 0% VAT rate constitutes violation of EU law

A Dutch BV had its place of effective management outside the Netherlands and did not have a fixed establishment there. Its business consisted of the sale and trading of alcoholic beverages (Goods), which were stored in a Dutch excise and customs warehouse under suspension of customs duties and excise. All sales took place within the warehouse and were treated as subject to the 0% VAT rate.

The Dutch tax authorities denied application of the 0% VAT rate on the basis that the Dutch BV had failed to appoint a fiscal representative, a requirement applicable to entities not established in the Netherlands. The Dutch BV argued that it was established in the Netherlands and that, in any event, the fiscal representation requirement constituted unlawful discrimination contrary to EU law.

The Dutch High Court held that the Dutch BV was not established in the Netherlands, emphasising that it had a single director who conducted business largely from abroad.

On the discrimination claim, the Court of Appeal found that the requirement imposed additional administrative burdens and costs solely on foreign entrepreneurs, while domestic businesses could apply the 0% VAT rate without such obligations. This constituted unequal treatment contrary to EU law. The Court held that no justification existed, referring to CJEU case C‑267/09, which confirmed that mandatory fiscal representation goes beyond what is necessary to combat tax fraud, including in the VAT context, where mutual assistance arrangements are in place.

Key takeaway

The Court of Appeal ruled that the Dutch requirement for appointing a fiscal representative as a formal condition for application of the 0% VAT rate constitutes an unjustifiable violation of EU law. Any non-established taxpayers having incurred Dutch VAT for wrongfully applying the 0% VAT rate due to not appointing a fiscal representative may want to review their position.

Reference

Gerechtshof Den Haag