- A reduced rate applies to the labour component of renovation and repair of homes over two years old.
- Materials are charged at the standard rate.
- Painting, plastering and insulation labour on older homes fall under the reduced rate too.
- Your quotation should separate labour from materials so you can see it applied.
- Rates and categories are set by legislation and change; confirm the current position before signing.
This is a short guide about a narrow subject, but it affects almost every renovation invoice in the Netherlands and it is frequently misunderstood by owners who have moved here. We are builders rather than tax advisers, so treat this as orientation and confirm specifics with your accountant.
The basic rule
The Netherlands has a standard VAT rate and a reduced rate. For renovation and repair work on homes, the reduced rate applies to the labour element, provided the home is more than two years old at the time the work is carried out. Materials are charged at the standard rate.
Two things follow:
- For an older home, the split between labour and materials on your invoice has a direct financial consequence. It should therefore be visible on the quotation, not buried in a single figure.
- For a home under two years old, the reduced rate does not apply. That changes the arithmetic on renovating recently completed new-build, which people occasionally do.
The two-year test relates to when the dwelling was first taken into use, not to when you bought it. If you are unsure, your accountant or the contractor can establish it.
What falls under the reduced rate
| Work | Reduced rate on labour? | Note |
|---|---|---|
| General renovation and repair of the dwelling | Yes | Home more than two years old |
| Painting and decorating | Yes | Long-standing category for older homes |
| Plastering and wall finishing | Yes | Same condition |
| Applying insulation | Yes, on the labour | Insulation material itself at the standard rate |
| Kitchen or bathroom installation | Yes, on the labour | Appliances and units at the standard rate |
| Cleaning inside the home | Yes | Separate category |
| Garden landscaping and paving | Generally no | Not part of the dwelling |
| Work on a home under two years old | No | Standard rate throughout |
| New build | No | Standard rate |
Categories and conditions are set in legislation and have been adjusted several times. Treat this as a guide and confirm the current position.
How it should appear on your quotation
A correctly structured quotation for an older home shows:
- Labour and materials separated, either per work section or as a summary at the end.
- The VAT rate applied to each, clearly stated.
- Any items that fall outside the reduced rate identified as such — garden work, for example.
- The contractor's VAT number and company details.
If a quotation shows only a total including VAT with no breakdown, ask for one. It is not an unusual request; it is how the system is designed to work, and you cannot verify the treatment without it.
Points that trip people up
- Assuming the whole invoice gets the reduced rate. It applies to labour, not materials.
- Buying materials yourself to save VAT. It does not work that way — materials carry the standard rate whoever buys them, and you lose the contractor's purchasing terms and their responsibility for the material.
- Forgetting the two-year test on a recently completed home.
- Garden and outdoor works assumed to be included. Generally they are not.
- Assuming stability. Reduced-rate categories have been reviewed and adjusted several times in recent years. Confirm before signing rather than relying on an article from three years ago — including this one.
If you let the property
Where a property is let, the VAT position can differ depending on how the letting is structured and whether you are treated as an entrepreneur for VAT purposes. Residential letting is generally exempt, which affects whether VAT on costs is recoverable; short-stay and holiday letting may be treated differently again.
This genuinely is a question for an accountant rather than a builder. What we can say is that it is worth asking before the work, because the answer can affect how the project is contracted and invoiced, and that is not something to reorganise afterwards.
Summary
The Netherlands applies a reduced VAT rate to the labour component of renovation and repair work on homes more than two years old, with materials at the standard rate. Painting, plastering and insulation labour fall under the same treatment. Make sure your quotation separates labour from materials and states the rate applied to each, and check the two-year test if the property is recent. Rates and categories change, so confirm the current position with your contractor or accountant before you sign.
Next: working with a Dutch contractor or back to renovating in the Netherlands.