VAT on restaurant and catering expenses may be deduced when costs are passed on
In a welcome move, the Dutch State Secretary signed a decree on 14 September 2021 that allows VAT-registered entrepreneurs to deduct VAT on restaurant and catering expenses in certain circumstances. The decree applies as from 23 September 2021.
VAT charged on the provision of food and beverages that are consumed onsite in a catering establishment (e.g., restaurant, bar, etc.) by staff, a business associate or the entrepreneur (hereinafter, “restaurant and catering expenses”) normally may not be deducted for VAT purposes in the Netherlands. In practice, the entrepreneur typically passes these costs on to another entrepreneur (e.g., where a caterer outsources a portion of its activities to another caterer). The same service is then provided by successive entrepreneurs, none of whom can deduct VAT on the restaurant and catering expenses, which results in the accumulation of VAT, i.e., multiple taxation.
In a relaxation of the rules, the decree issued by the State Secretary allows entrepreneurs to deduct VAT on restaurant and catering expenses provided they do not purchase the service as end users, but pass the costs on to another party and charge VAT. The entrepreneur must state on the invoice to the customer that the supply involves the provision of food and beverages for onsite consumption as referred to in article 15(5) of the Dutch VAT Act. It is then clear that the customer is not entitled to deduct the VAT on the costs unless the customer is not an end user and may also benefit from the decree.
Entrepreneurs that have acted in accordance with the decree in the past (because of individual approvals) do not need to take any further action. However, this does not necessarily mean that if an entrepreneur did not take the VAT deduction in the past, it cannot now be claimed. In our opinion, an input VAT deduction is available if the right to a deduction arose on or after 23 September 2021 (the effective date of the decree). Thus, VAT can be deducted on restaurant and catering expenses invoiced to the entrepreneur as a customer on or after that date if the relevant requirements are met. Additionally, if the restaurant and catering expenses were incurred before 23 September 2021, but have not yet been invoiced to the customer and the taxpayer still can deduct the VAT in the next VAT return, we are of the opinion that a deduction may be possible if all of the requirements are met.