What is foreign VAT?

Foreign VAT falls outside the Dutch VAT return

Foreign VAT is the sales tax that a Dutch entrepreneur pays on business expenses in another EU country: fuel, a hotel stay, tolls, a trade fair stand or a business meal. That VAT is levied according to the VAT rate and VAT rules of the country where the expense is incurred, not according to Dutch rules. As a result, that amount does not belong in the Dutch VAT return — that return is intended for VAT that Dutch suppliers charge, not for VAT from a supplier in Germany, France or Spain.

That is immediately the reason why that VAT does not come back automatically. The Dutch Tax Administration cannot refund VAT that another country has levied, and the ordinary Dutch return has no box for foreign VAT. For refund there is a separate, European route: a request per country and per period, directed at the country where the VAT was paid. Each country also determines for itself which cost categories are eligible for refund — what is recoverable in one country is not automatically so in another. That makes it not a matter of "including with the ordinary return", but of a separate process with its own forms and its own assessment by the refund country.

Legal basis: Directive 2008/9 governs refund

This separation between domestic and foreign VAT, and the right to request that foreign VAT separately, derives from Council Directive 2008/9/EC on VAT refunds to taxable persons not established in the Member State. The Directive provides that an entrepreneur who is not established in the country where the expense is incurred can request the VAT paid there to be refunded via a request to his own tax administration, after which it forwards it to the refund country. The Tax Administration describes this route on the page on requesting VAT refunds from other EU countries, including the digital portal procedure that goes with it.