VAT refund for cancellations

Due to the current coronacrisis, many appointments, meetings and events have been cancelled. As an entrepreneur or organisation, you may be able to limit the financial loss in the event of a cancellation to some extent by reclaiming VAT.

There are several options to do so:

  1. If you do not reimburse the client, it is necessary to assess how the amount paid by your client should be qualified. Is it compensation for performance to which they were entitled but did not use? Or is it compensation for damages? In the first case, VAT will remain due. In the second case, no VAT is due, so if it had already been paid to the Dutch Tax and Customs Administration, it may be reclaimed subject to conditions. Whether it concerns compensation for damages depends entirely on the agreements made. Legal precedents are very casuistic in this context and the Dutch Tax and Customs Administration has been asked whether it can issue clear guidelines for this during the coronacrisis.
  2. When you do not refund your client, but issue a voucher for the cancellation of your services or deliveries, you can find more information here about the VAT consequences of vouchers.
  3. In the event that you repay the full amount to your client, a reclaim of VAT is possible subject to conditions if you had previously paid the VAT to the Dutch Tax and Customs Administration.
  4. If you repay part of the amount to your client, VAT may also be reclaimed for that part as explained under 3. For the part that is not refunded, as explained under 1, it will have to be determined whether it concerns compensation for a performance that has not been used or compensation for damages.

If you have to deal with cancellations, we advise you to assess which situation applies to you and which agreements have been made between you and your client. You may be able to limit your financial loss to some extent by reclaiming VAT. We will of course be happy to help you with that. We also like to think along with you to see if there are other options for you to improve your current cash flow position.