Imagine a small webshop owner reviewing the year. Customer invoices carried no VAT. Regular VAT returns were absent. The KOR seemed to be doing what it promised by keeping administration light.
Then the foreign supplier invoices came under review. The apparent simplification began producing a cash bill.
That tension sits at the heart of ECLI:NL:RBZWB:2026:6383, a judgment issued by the Zeeland-West-Brabant District Court on 13 July 2026. The case concerned a sole proprietor who operated a webshop and used the Dutch small-business VAT exemption, the KOR, during 2022.
The business had purchased €71,529 of services from suppliers in Denmark, Ireland and Sweden. The court upheld €15,021 in reverse-charged VAT and €1,154 in tax interest. The entrepreneur accepted that the VAT was due, but argued that the KOR had ended and the VAT should therefore be deductible.
The court found that he had not shown enough Dutch VAT-taxable turnover to exceed the €20,000 threshold.
The wrong turnover number
This is where commercial instinct and VAT law separate. A founder normally reads turnover as the total value of sales. The KOR uses a more specific calculation.
The current Dutch threshold is €20,000 a year. The calculation mainly concerns supplies that would be subject to Dutch VAT without the exemption. Certain specified exempt supplies also count, including some transactions involving property, financial services, insurance and securities.
Sales taxed in another country do not count towards the Dutch threshold. Dutch zero-rated supplies, including qualifying exports and intra-Community supplies, can count. An intra-Community acquisition does not count as turnover, although it may still create a Dutch VAT liability.
That distinction matters for businesses selling across borders. A webshop can have meaningful commercial revenue and still remain below the Dutch KOR threshold, depending on where its supplies are taxed. The founder may feel that the company has clearly grown beyond a small-business scheme. The VAT records may tell a different story.
I read the ruling as a warning against managing KOR through bank turnover alone. Customer location, the nature of the supply and the place where VAT is due all matter. A dashboard showing only total revenue can look accurate while answering the wrong tax question.
The missing deduction changes the price
Under an ordinary VAT position, reverse-charged VAT on a foreign service can generally be reported and deducted in the same return. That assumes the purchase supports VAT-taxable activities and the normal conditions are met. The two entries may then offset each other.
The result changes under the KOR. A participant does not charge VAT, normally does not submit regular VAT returns and cannot reclaim VAT on costs or investments. Cross-border transactions can still create a Dutch reporting obligation. Reverse-charge rules may therefore produce VAT that the business must pay without being able to recover it.
VAT then moves from a neutral accounting entry into the purchase price. A €1,000 foreign service can cost more than the supplier invoice suggests. The same pressure can affect software, advertising, design, consultancy or marketplace services. The judgment itself does not identify the services purchased in this case.
Return to our webshop owner. A campaign may look profitable when approved at the supplier’s net price. Once irrecoverable VAT enters the calculation, the margin narrows. Multiply that across recurring subscriptions and outsourced work, and the KOR advantage may disappear long before the €20,000 threshold offers a useful warning.
A lighter scheme still needs strong records
The governance lesson is not that KOR is unsuitable. For a business with limited costs and mainly private customers, it can remain economically sensible. The lesson is that a simpler VAT scheme still needs a clear VAT map.
A useful sales view separates Dutch VAT-relevant turnover from sales taxed elsewhere. The purchase side needs its own distinctions: domestic or foreign supplier, goods or services, VAT charged or reverse-charged, and recoverable or irrecoverable. These are ordinary ledger fields, but together they determine cash exposure.
Goods purchased from another EU country and services bought from an EU supplier do not follow identical VAT rules. The transaction type matters. So does the business use of the purchase and the evidence supporting its VAT treatment.
Timing matters too. KOR status, foreign purchasing and expected investment should meet in the same management conversation. If foreign procurement rises sharply, the cost of staying in the exemption can change. Discovering that during the annual accounts leaves fewer choices and may reveal a liability for which no cash was reserved.
The court decision also shows the limits of a later commercial explanation. Saying that VAT should have balanced to zero is not enough when the records do not establish the required VAT position. Sales invoices, supplier invoices, VAT coding and the recorded start or end of KOR participation carry more weight than an account reconstructed after the event.
The current choice is more flexible
The facts before the court concerned 2022. Since 1 January 2025, the former minimum three-year KOR participation period has ended. A business can now terminate participation under the current notice rules, with effect from an eligible later VAT return period. The notice must be filed in time.
That flexibility makes regular review more useful. It does not change the law that applied to the period decided by the court.
There is also a separate EU-KOR for qualifying cross-border sales. It has its own national thresholds, a €100,000 ceiling for annual EU-wide turnover and quarterly information reporting. Domestic KOR and EU-KOR are not interchangeable labels. Neither removes the need to classify purchases correctly.
For a small internationally active business, the review can remain modest but precise. Compare KOR status with Dutch VAT-relevant sales, foreign supplier volume and planned investment. Price major purchases with irrecoverable VAT included. Keep invoices and contracts organised when the transaction pattern is difficult to classify.
KOR can reduce paperwork. It cannot make cross-border VAT disappear. The real question is not whether the scheme feels simple, but whether it still fits the way the business earns, buys and grows.
Let XTROVERSO review your KOR position, foreign invoices, and cash planning
The data, sourcing, and analysis behind this article were conducted by Linda Pavan. AI was not used to identify sources, build the factual basis, or produce the analytical judgment contained here. AI was used only as a drafting aid. The final English text was personally reviewed, edited, and approved by Linda Pavan before publication.
