In the Netherlands, invoicing clients for out‑of‑pocket expenses is more complicated than just adding a line item to your bill. The difference between folding costs into your service and forwarding a third‑party fee, often called a disbursement, can determine whether you pay value-added tax (VAT). That’s why getting it right matters—for your cash flow and compliance. Below, we’ll explain how to pass on VAT costs (doorbelasten kosten btw in Dutch).

What’s in this article?

• What are recharged costs in Dutch business?
  
• When do you charge VAT on passed-on costs?
  
• How do you invoice recharged costs correctly?
  
• What mistakes should businesses avoid?
  
• FAQ: VAT on passed-on costs
  
• How Stripe Tax can help
  

What are recharged costs in Dutch business?

When you work on projects for clients, you often pay for travel, materials, professional fees, or even the catering at a launch. Later, you invoice the client for those expenses. In Dutch VAT terminology, that’s known as recharging or passing on VAT costs.

To manage VAT correctly, you need to know whether you’re including those costs in your own service or forwarding a bill.

Dutch tax rules distinguish between these two situations:

• Cost recharging (kostendoorberekening): This is when you buy goods or services for your business and then bill someone else for part or all of that spend. Think paint and brushes for a mural, your mileage to reach a client’s office, or the legal advice you commission. The expenditure is yours, and you’re recovering it from your customer.

• Cost pass‑through (doorlopende post): This is when you act purely as an intermediary. You pay a third‑party invoice in your client’s name and recover that exact amount. There’s no service of your own so you’re outside the VAT system.

This distinction matters because just passing on costs isn’t a taxable supply. VAT applies only when the cost is tied to your own work. Even if the original invoice carries a different VAT rate, once the expense forms part of your service, it’s taxable.

When do you charge VAT on passed-on costs?

In the Netherlands, the guidelines are straightforward. If a cost is part of your own taxable service, it includes VAT. If you’re simply forwarding a bill on behalf of your client, it doesn’t.

Here’s how each category is defined.

Costs that follow your main service

Think of your invoice as a single package. Whether you’re building a website, producing a film, or organizing an event, all the expenses you pay along the way—from software licenses to train tickets—become part of that package.

When you add these items to your invoice (excluding the VAT you paid), you apply the same VAT rate you charge for your core service. If your service is taxed at 21%, then the costs for travel and materials you recharge are also taxed at 21%, even if those items were originally bought at a different rate. You can then reclaim the VAT you paid on these costs in your own return.

Costs you pass through

Sometimes, you’re simply paying a third‑party invoice for your client and asking to be reimbursed. In Dutch VAT law, these are known as doorlopende posten or pass‑through items.

To qualify, two conditions need to be met:

• The payment is made in your customer’s name and for their account.

• Your customer reimburses you for the exact amount you paid.

When the costs qualify, the amount falls outside your taxable turnover. You don’t charge VAT on it, and you don’t claim any VAT back. Typical examples include court registry fees advanced by lawyers, government charges, and other fees where the client’s name appears on the original bill.

Getting the distinction right

Misunderstandings arise when businesses treat an expense as a pass‑through cost when it’s really part of their own services, or vice versa.

Two common mistakes are:

• Applying the VAT rate from the supplier’s invoice instead of your own service’s rate

• Forgetting that even nondeductible items must be recharged as part of your taxable turnover

The safest approach is to ask yourself whether the cost relates to work you’re doing for the client. If the answer is yes, it follows the VAT treatment of that work. If you’re simply acting as a temporary banker for your client, then it’s a doorlopende post.

How do you invoice recharged costs correctly?

Following these best practices will keep you compliant when you invoice for expenses and make life easier for your client:

• Be transparent: List each recharged cost on its own line with a clear description. Attach copies of receipts or supplier invoices. If a cost qualifies for pass‑through, say so and note that it’s billed on behalf of your client.

• Use the right VAT rate: Apply the same rate you charge for your main service. If your invoice includes both taxable and exempt items, separate them so each part receives the correct treatment. For exempt pass‑through costs, explain the reason (e.g., an insurance premium).

• Agree on costs up front: Talk to your client before you incur substantial expenses. Put your arrangements into the contract or engagement letter so there are no surprises later. Tell them whether you’ll add a markup or forward the amount you paid.

• Keep your paperwork: Save receipts, invoices, and notes that tie each expense to the project. Good records support your VAT deduction and help prove that a pass‑through cost isn’t part of your turnover.

• Remember cross‑border transaction rules: If you recharge costs to EU customers, you might need to use the reverse charge mechanism and convert foreign currencies. Automated tools can handle VAT rates, currency conversion, and reverse charge wording.

What mistakes should businesses avoid?

Even seasoned businesses can make mistakes with VAT when they recharge costs.

Watch for these pitfalls:

• Misclassifying a cost: If you provide a service, you must charge VAT. If you forward a third‑party bill, you don’t.

• Applying the wrong rate: The VAT rate your client pays isn’t the same as the one you paid your supplier. Costs that are linked to your service take your service’s rate, regardless of the rate on the receipt.

• Overlooking input VAT: When a cost is part of your taxable service, you can reclaim the VAT you paid. Forgetting to do this leaves money on the table.

• Ignoring sector‑specific exemptions: Education, healthcare, and financial services are exempt from VAT. Apply VAT where appropriate, and skip it when it doesn’t apply.

• Poor documentation: Vague invoices and missing receipts invite trouble. Keep detailed records and issue credit notes promptly if you discover an error. Well-organized paperwork makes it easy to prove whether or not VAT was due and protects your right to reclaim it.

FAQ: VAT on passed-on costs

When you’re figuring out how to apply VAT to passed-on costs, it’s common for certain questions to arise. Here’s what you should know.

How do I figure out the correct VAT rate?

Look at the rate you use for your core work. If you’re an architect who charges 21%, your travel and software costs are also taxed at 21%. Only costs tied to exempt services, such as insurance, exclude VAT.

Can I reclaim VAT on costs I pass on?

Yes, as long as those costs are part of your taxable service. You deduct the VAT you paid, add VAT to your invoice, and pay the difference to the tax office. If the cost is nondeductible or exempt, you can’t reclaim it and must include the full amount.

What about EU clients?

The reverse charge mechanism usually applies for business customers in other EU countries. Instead of adding Dutch VAT, your invoice must show both VAT numbers and a note that the customer accounts for the tax.

Does the small businesses scheme (KOR) change anything?

If you take part in the KOR, you don’t charge VAT and can’t reclaim input VAT. You simply pass on the gross amount. Evaluate whether staying in the KOR makes sense, if you often recharge large expenses.

Can one invoice mix different VAT treatments?

Absolutely. Just separate each category: taxable services at their rates, exempt charges with brief explanations, and pass‑through items listed at cost. Clear separation keeps your books tidy and will help your clients stay better informed.

How Stripe Tax can help

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