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

LFR

• No Dutch VAT number is required for the foreign business. The LFR handles VAT obligations under its own VAT number.

GFR

• The foreign business must obtain a Dutch VAT number before engaging in GFR services, which involves a more extensive administrative process.

Administrative burden

LFR

• LFR generally involves less administrative complexity, as it focuses on specific VAT obligations related to imports and subsequent B2B transactions.

GFR

• 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

• 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

• 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

LFR

• Typically, LFR services are less costly since they involve limited VAT obligations and do not require VAT registration.

GFR

• 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

 LFR

• The LFR assumes responsibility only for the specific transactions they manage, which limits the scope of liability.

GFR

• The GFR assumes a wider range of responsibilities, which can increase the scope of liability for both the representative and the foreign business.

Summary

• LFR is best for businesses that need a straightforward solution for handling VAT on imports and B2B transactions within the EU, without the need for a Dutch VAT number.
• GFR is better suited for businesses with broader commercial activities in the Netherlands that require comprehensive VAT management, including VAT registration and filing.

Read more about LFR