Passing costs on to your client: how does VAT work?
Written by Ilias Aarrass6 min read · Published on · Last reviewed on 
In short
Passed-on costs form part of your own supply, so they carry your service’s VAT rate: a consultant re-invoices a train ticket that carried 9 per cent VAT at 21 per cent.
- Always copy the amount excluding VAT from the receipt; otherwise you charge VAT on VAT and overbill.
- A disbursement is an amount you advance in your client’s name and for their account, invoiced to them: no VAT is charged and no input VAT reclaimed.
- VAT on food and drink consumed on hospitality premises stays excluded from deduction, even when you pass the cost on in full.
You buy materials for a job, pay for parking at a client's site or book a train ticket for an assignment. You want to pass those costs on. The question is whether you copy the amount from the receipt including its VAT rate, or charge your own rate. In most cases it is the latter, and that surprises people.
The main rule: your rate, not the receipt's
When you pass costs on, they become part of your supply to the client. The VAT rate of your service then applies to the whole amount, including the passed-on costs. The rate on the original receipt no longer matters.
An example makes it concrete. You are a consultant travelling by train to a client. That ticket carried 9 per cent VAT. Passing those travel costs on means charging 21 per cent, because your advisory work falls under 21 per cent. You reclaim the 9 per cent on the ticket as input VAT.
Passing on a train ticket
- Train ticket
- € 32.70 incl. 9% VAT
- You reclaim as input VAT
- € 2.70
- On your invoice you put
- € 30.00 excl. VAT
- You charge your own rate
- 21% = € 6.30
Result: your client pays € 36.30 and you neither gain nor lose
The exception: disbursements
There is one situation where you pass costs through one to one: the disbursement. That applies when you advance an amount that really belongs to your client, in that client's name and for their account. If you buy in a service and resell it in your own name, different rules apply; see VAT when reselling services.
The hallmark is that the invoice or levy is in your client's name, not yours. Think court fees, municipal charges or a Chamber of Commerce registration you arrange for a client. You book that amount neither as cost nor as turnover: it merely passes through your records.
| Passed-on costs | Disbursement | |
|---|---|---|
| Invoice is in the name of | You | Your client |
| VAT rate | That of your service | No VAT |
| Reclaim input VAT | Yes | No |
| Counts in your turnover | Yes | No |
What cannot be passed on
You may pass costs on, but you cannot always reclaim the VAT. For food and drink in hospitality, input VAT is excluded, even if you pass that client lunch on in full. You do still charge VAT on the amount you pass on.
That feels lopsided and it is: you remit VAT you could not reclaim. So pass those costs on gross, or build them into your rate. See dining with a client and VAT on a hotel stay.
Put it on your invoice and in your terms
Disputes about passed-on costs rarely concern VAT and almost always concern expectations. Agree in advance which costs you pass on and at what rate, and record that in your terms and conditions or quote.
- Itemise passed-on costs as a separate line, not hidden in your hourly rate
- List disbursements separately and without VAT, stating the reason
- Keep the original receipt in your records, even when passing it on
- If you add a mark-up on passed-on costs, say so in advance
Frequently asked questions
Which VAT rate applies to passed-on costs?
The rate of your own service, not the original receipt's. A consultant passing on a train ticket that carried 9 per cent charges 21 per cent on it, because advisory work falls under 21 per cent.
What is a disbursement?
An amount you advance in your client's name and for their account, where the invoice or levy is in that client's name. Think court fees or municipal charges. You charge no VAT on it and reclaim no input VAT.
Do I copy the amount including or excluding VAT?
Excluding. Copying the amount including VAT and then adding your own rate means charging VAT on VAT and overbilling your client.
Can I reclaim VAT on a passed-on lunch?
No. Food and drink consumed on hospitality premises fall under a deduction exclusion, even when you pass the cost on in full. You do still charge VAT on the amount passed on.
Sources
- What you charge no VAT on: disbursementsBelastingdienst · belastingdienst.nl
- The 21, 9 and 0 per cent VAT ratesBelastingdienst · belastingdienst.nl
Sources checked on
This article provides general information based on the rules known for 2026 and does not replace personal tax advice. For your specific situation, we're happy to take a look with you.
