Differences of LFR and GFR in the Netherlands

Scope of Services

Limited Fiscal Representation (LFR)

• LFR is used primarily for specific VAT-related obligations associated with the importation of goods into the Netherlands and subsequent B2B deliveries within the EU.
• The representation is limited to handling VAT on these specific transactions, and the foreign business does not need to register for a Dutch VAT number.
• LFR allows the deferral of import VAT payments, improving cash flow for the business.

General Fiscal Representation (GFR)

• GFR provides a broader range of VAT-related services, including handling all VAT obligations for the foreign business in the Netherlands.
• This representation covers not only import VAT but also all other VAT-related activities, such as domestic sales, acquisitions within the EU, and more.
• The foreign business must register for a Dutch VAT number, which increases administrative responsibilities.

VAT number requirement

• The LFR handles VAT obligations under its own VAT number. No Dutch VAT number is required for the foreign business. 
• The foreign business must obtain a Dutch VAT number before engaging in GFR services, which involves a more extensive administrative process.

Administrative burden

• LFR generally involves less administrative complexity, as it focuses on specific VAT obligations related to imports and subsequent B2B transactions.
• GFR involves a higher administrative burden due to the need to manage a broader range of VAT obligations, including VAT registration, periodic VAT filings, and compliance with all Dutch VAT regulations.

Flexibility and suitability

• LFR is more suitable for businesses that primarily import goods into the Netherlands for B2B transactions within the EU and want to defer VAT payments without registering for Dutch VAT.
• GFR is ideal for businesses that engage in a wider range of commercial activities in the Netherlands, including domestic sales and intra-EU transactions, and need comprehensive VAT representation.

Cost implication

• Typically, LFR services are less costly since they involve limited VAT obligations and do not require VAT registration.
• GFR tends to be more expensive due to the broader scope of services, the requirement for VAT registration, and the increased administrative responsibilities.

Risk and liability

• The LFR assumes responsibility only for the specific transactions they manage, which limits the scope of liability.
• The GFR assumes a wider range of responsibilities, which can increase the scope of liability for both the representative and the foreign business.

Read more about LFR