VAT background
VAT identification number for sole traders: is everything registered under the correct number?
• 4 min read
Sole traders hold both a VAT identification number and a turnover tax number. These are regularly confused, leading to rejected VAT and excise duty refund claims.
Two numbers, one business
Entrepreneurs registered as sole traders or self-employed professionals hold two different VAT numbers: the VAT identification number (btw-id) and the turnover tax number (omzetbelastingnummer). In practice, this regularly causes confusion, particularly when it comes to VAT or excise duty refund claims abroad.
The confusion is understandable. For a long time, both numbers were used interchangeably. But the rules have changed, and those who have not kept up with this development face a real risk of rejected claims.
How it worked before
Until 31 December 2019, the VAT number of a sole trader was based on the citizen service number (BSN). The number followed a fixed format: NL + BSN + B01.
This meant the entrepreneur's BSN appeared on every invoice and was effectively public. The Dutch Data Protection Authority ruled that this posed an unacceptable privacy risk, with the potential for identity fraud. The legislature responded accordingly.
The legislative change from 1 January 2020
From 1 January 2020, sole traders have been issued a new VAT identification number (btw-id). This number is no longer based on the BSN and has an entirely different format. The VAT identification number never ends in B01.
The turnover tax number has not disappeared. It remains in use for internal communication with the Dutch Tax and Customs Administration. For all other purposes, including communication with foreign tax authorities, only the VAT identification number may be used.
The turnover tax number and the VAT identification number are two different numbers. Only the VAT identification number is valid for external use.
Why this is critical for foreign refund claims
When submitting VAT and excise duty refund claims abroad, the validity of your VAT number is verified through the VIES database (VAT Information Exchange System). Foreign tax authorities and software systems consult this database to confirm whether a stated VAT number is valid and active.
The old BSN-based number no longer returns a result in VIES. Anyone who submits a claim using the turnover tax number or the old BSN-based number risks an immediate rejection, or at the very least additional questions that are difficult to answer, given that it has been the entrepreneur's own responsibility to use the new number since 2020.
This applies to 8th Directive VAT refunds in other EU member states, to non-EU refunds in countries such as the United Kingdom, Norway and Switzerland, and to excise duty refunds such as the Belgian scheme for professional diesel.
Everything must reflect the new VAT identification number
A correct foreign refund claim requires that all documents and registrations are consistent. The VAT identification number must match across:
- Purchase invoices from suppliers, so that invoices correspond with the claim
- Login credentials for the EU VAT portal, through which foreign VAT refunds are submitted
- Permits, such as the Belgian excise permit for professional diesel
- Correspondence with foreign tax authorities
If the VAT identification number is incorrect on any of these, the claim may be rejected, even if the invoices and the request are substantively correct.
Actively inform your suppliers so they use the correct VAT identification number on your purchase invoices. An invoice with an incorrect VAT number is formally incomplete and may be refused.
"It has worked for years" is no guarantee
We regularly speak with entrepreneurs who have been submitting VAT and excise duty refund claims using the old number for years without any issues. That may sound reassuring, but it reflects good fortune rather than certainty.
Foreign tax authorities do not always check with equal rigour, and a system that has accepted an error is not a system that approves of one. VIES checks are increasingly being carried out in an automated manner. As that process expands, the risk of rejections will grow.
Those who have not encountered problems to date have simply been fortunate. That is an uncomfortable conclusion, but an honest one.
Let professionals guide you
Reviewing your VAT registrations, updating your supplier records and ensuring correct permits takes time, but it prevents delays and rejections further down the line.
Delta Refund Solutions will help you assess your situation and ensure that your claims are correct from start to finish.
Feel free to contact us, we are happy to help.
