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Value-Added Tax (VAT) is a tax charged on the private and public consumption of goods and services. It is levied at all stages in the production and distribution chain and paid to the state on the basis of the value added at each stage, hence the name "value-added tax". In general, VAT must be paid by taxable traders. In principle, every such trader charges VAT on its sales and is (in principle) entitled to deduct from this amount the VAT paid on his purchases. Ultimately, the tax is borne by the "final consumer", who cannot deduct VAT paid on purchases.
VAT was introduced in Belgium in 1971 and, in the three languages of the country, is called "Belasting over de Toegevoegde Waarde (BTW)", "Taxe sur la Valeur Ajoutée (TVA)", and "Mehrwertsteuer (Mwst)".
The tax is charged on most supplies of goods or services performed in Belgium. It is also charged on goods imported from countries outside the European Union, on goods coming into Belgium from other EU member states and on some services purchased abroad.
Who must register for VAT?
No VAT registration threshold applies in Belgium. Every taxable trader (other than those who are not able to deduct any input VAT) must notify the commencement of activities in Belgium (see details below).
A taxable trader is any person who, in the exercise of an economic activity in a regular and independent manner, with or without a profit motive, on a principal or accessory basis, supplies goods or services for consideration, irrespective of the place where the economic activity is exercised.
A taxable trader who is not able to deduct any input VAT is a taxable trader who exclusively performs exempt transactions that do not provide for the deduction of input VAT.
The place of establishment is not a criterion in VAT registration. What matters is that the taxable person supplies, for (deemed) consideration in Belgium, goods or services that make Belgian VAT become due by the person.
The extensive reverse charge mechanism (i.e. whereby the customer, who is either established in Belgium or identified for VAT via a VAT representative, must account for the VAT in Belgium, and not the trader, who is not established in Belgium), facilitates companies that want to do business in Belgium without having to register for VAT there. In cases where the customer must account for the VAT on the transaction, the trader does not have to register for VAT and comply with different VAT rules.
Furthermore, there is a different registration procedure for traders established for VAT purposes in Belgium and traders not established for VAT purposes in Belgium.
Established taxable traders
Established taxable traders must contact the local VAT Control Office relevant to the place in which the business is established.
Non-established taxable traders
Non-established taxable traders established in another EU member state can directly register for VAT purposes. Non-established taxable traders established outside the EU must appoint a VAT representative. There are two kinds of VAT representation in Belgium:
1. The individual VAT representative who can be appointed for all taxable transactions a non-established taxable trader carries out in Belgium;
2. The global or simplified VAT representative who can be appointed only for a limited number of defined transactions. These include:
a) Importing of goods not placed under a VAT only warehouse regime, insofar as importation is carried out for the subsequent supply of the same goods;
b) Imports, intra-Community acquisitions and supplies of goods that are placed under a VAT only warehouse regime;
c) Supplies of goods that are under a VAT only warehouse regime while maintaining this regime;
d) Services with respect to goods that qualify for b or c above;
e) Clearance of goods from the VAT only warehouse regime;
f) Operations consisting of an intra-Community acquisition of goods that are put under a VAT only warehouse regime, insofar as the intra-Community acquisition of the goods is performed for the purpose of a subsequent exporting of the same goods;
g) Operations consisting of an intra-Community acquisition of goods that are not placed under a VAT only warehouse regime, with the exception of all other transactions subject to VAT in Belgium.
Because an individual and a simplified VAT representative cannot be combined in Belgium, a simplified VAT representative can be appointed only when a taxable person carries out the transactions listed above.
For non-established taxable traders established in another EU member state, the appointment of a VAT representative is optional. This option can, in certain circumstances, be beneficial because it allows some suppliers to invoice non-established EU taxable traders without VAT, thereby avoiding the pre-financing of VAT.
A VAT representative is jointly liable for all VAT related debts of the non-established taxable traders. A guarantee (in practice, a bank guarantee) must be provided to the Belgian Treasury.
VAT group
With effect from April 1 2007, Belgium adopted the VAT group system, which enables independent legal entities to be treated as a single VAT taxable person (i.e. a VAT group) if they are closely bound by financial, economic and organizational links.
The benefit of a VAT group is that for VAT no transactions are deemed to take place between the entities that belong to the same VAT group. This is likely to have a positive influence on the cash flow position of the group members. For mixed taxable persons (who only have a limited right to deduct input VAT), a VAT group may even reduce the volume of irrecoverable VAT which is created by outsourcing activities. Finally, a VAT group reduces the number of compliance obligations, for example, only a consolidated VAT return should be filed for all members of the VAT group, who no longer have to file individual returns.
Belgian VAT numbers
With effect from January 1 2008, the mandatory structure of a Belgian VAT number is: BE X999 999 999. For numbers existing before that date, the X is replaced by a 0. For new numbers attributed with effect from January 1 2008, the X has been replaced by a 1. Enterprises benefiting from the special scheme for small undertakings do not receive a VAT number with the prefix BE.
What are the VAT rates?
The standard VAT rate is 21%.
A reduced VAT rate of 12% applies to supplies of goods and services such as phyto-pharmaceutical products, margarine, (inner) tubes, pay television and social housing, for example.
A reduced VAT rate of 6% applies to supplies of goods and services considered basic necessities (food and pharmaceuticals), newspapers, publications and books (sometimes also zero-rated), works of art, antiques and collector's items, cars for disabled people, goods supplied by social organizations, renovation works on immovable property (under strict conditions), contract farming, passenger transport, the use of cultural, sporting and entertainment venues, copyrights, concerts and exhibitions, hotels and camping, some medical equipment and some housing.
Exemptions
See www.flandersinvestmentandtrade.com
Time of supply
VAT becomes due at the "time of supply" or "tax point." In Belgium, different time of supply rules apply to goods and services.
Goods
The time of supply for goods is defined as one of the following events:
a) When the goods are put at the disposal of the buyer;
b) If the goods are shipped by the supplier, when the goods arrive at the buyer's premises;
c) If the supplier has to install the goods, when the installation is completed.
Services
The time of supply for services is when the service is completed.
Continuous Supplies of Services
For a continuous supply of services (for which either periodic invoices are issued or periodic payments are made), the time of supply is at the end of each agreed invoicing or payment period.
Additional Time of Supply Rules
VAT becomes due in respect of a supply of goods or services before the basic tax point if any of the following take place before the basic time of supply:
a) An invoice is issued;
b) Payment is received.
Intra-Community Acquisitions
The time of supply for an intra-Community acquisition of goods is the moment of the arrival of the goods in Belgium. VAT becomes due on an intra-Community acquisition of goods on the 15th day of the month following the month in which the acquisition was made. If the supplier issues an invoice prior to this date, VAT becomes due when the invoice is issued.
Imported Goods
In principle, when goods are imported into Belgium, VAT is due at the time of importation. However, a company registered for VAT in Belgium can apply for an import license (the so-called ET 14.000), as a consequence of which the import VAT no longer has to be paid at the time of importation, but is deferred to the next periodic VAT return. In principle, in the same VAT return, the import VAT can be deducted (this deferral results in a zero-rated operation) and apart from the bank guarantee of 1/24th of the estimated import VAT liability, no pre-financing of import VAT is required.
Furthermore, the Belgian VAT warehousing regime is especially advantageous in that it is a well-developed system that allows all types of goods that are imported into Belgium to be included in the warehouse, as a consequence of which payment of import VAT is suspended. Therefore, the Belgian VAT warehousing regime is a worthy alternative to the ET 14.000 license (especially when goods need to undergo further packaging or other permitted activities before they are delivered to the customer).
Which VAT is deductible?
In general, the following input VAT is deductible:
VAT is deductible insofar as the goods or services are used for the purposes of:
1. Taxed transactions;
2. Taxable transactions exempt from VAT that provide deduction of input VAT (exempt with credit);
3. Taxable transactions carried out outside Belgium (which would give the right to deduct input VAT if they had been performed in Belgium);
4. Taxable transactions exempt from VAT without credit and mentioned in article 44, §3, 4° to 10° of the Belgian VAT Code (financial and insurance transactions), provided these transactions are performed for a recipient established outside the EU or are directly linked to goods that will be exported to a country outside the EU;
5. Agency services in relation to the transactions mentioned under point 4 above.
In general, the following input VAT is not deductible:
Input VAT on goods and services not used for the purposes mentioned above.
The following supplies are specifically denied input VAT deduction:
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Intra-Community acquisitions or supplies of manufactured tobacco;
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Intra-Community acquisitions or supplies of alcoholic beverages other than those intended for resale or to be provided as part of a supply of services;
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Accommodation, food and beverages for immediate consumption, unless the costs are incurred by:
a) Employees delivering goods or providing services away from the business premises or;
b) Other businesses that in turn supply the same service for consideration;
A maximum of 50% of the input tax paid on vehicles used for the carriage of passengers and/or goods is deductible unless it concerns the following vehicles:
a) Vehicles with a maximum capacity of more than 3500 kg (trucks);
b) Vehicles for passenger transport with more than 8 seats (excluding the driver);
c) Vehicles equipped especially for the transport of sick and injured people, prisoners and corpses;
d) Vehicles that, based on technical features, cannot be enrolled with the department of motor vehicles (e.g. vehicles which can only be used for sport events);
e) Vehicles equipped especially for camping;
f) Vehicles described in Article 4, §2 WIGB (vans);
g) Motorized bicycles and motor cycles;
h) Motor vehicles for sale by a taxable person whose main economic activity consists of the selling of motor vehicles;
i) Motor vehicles for lease by a taxable person whose main economic activity consists of the leasing of motor vehicles to the general public;
j) Motor vehicles destined to be used exclusively for paid passenger transport;
k) New motor vehicles subject to an exempt IC supply. In this case the deduction of VAT is allowed to the extent that VAT would have become due in the case where no exemption applied.
The above restriction also applies to VAT charged on services or goods relating to these vehicles.
Partial Exemption
Input tax directly related to the making of exempt supplies is generally not recoverable. If a Belgian taxable person makes both exempt and taxable supplies they are not allowed to fully recover input tax. This situation is referred to as "partial exemption."
In Belgium, the amount of input tax that a partially exempt business may recover can be calculated in one of two ways:
a) The first method is a general pro rata calculation based on the percentage of taxable and exempt turnover (i.e. turnover generating input VAT deduction/total VAT turnover). The recovery percentage is rounded up to the nearest whole number (for example, a recovery percentage of 77.2% is rounded up to 78%).
b) The second method is a two-stage calculation. The first stage identifies the input VAT that can be directly allocated to taxable and to exempt supplies. Input tax directly allocated to taxable supplies is deductible; input tax directly related to exempt supplies is not deductible. Supplies that are exempt with credit are treated as "taxable supplies" for these purposes. The next stage identifies the amount of the remaining input tax (for example, input tax on general business overheads). The calculation may be performed using the general pro rata calculation based on values of supplies made (or it may be based on a special calculation agreed with the VAT authorities). This is called the 'real-use methodology'.
Capital Goods
Capital goods are items of capital expenditure that are used in a business over several years. Input tax is fully deducted in the year in which the goods are acquired. However, the amount of input tax recovered for capital goods must be adjusted over time if the taxable person's recovery position changes during the adjustment period, or when the use of the capital goods changes.
In Belgium, the capital goods adjustment applies to the following assets for the number of years indicated:
a) Immovable goods, buildings (adjusted for a period of 15 years);
b) Other movable capital assets (adjusted for a period of 5 years).
The adjustment is applied each year following the year of acquisition to a fraction of the total input tax (1/15th for land and buildings and 1/5th for other movable capital assets). The adjustment may result in either an increase or a decrease of deductible input VAT.
With effect from January 7 2007, the same rules apply equally to services with the same characteristics as the aforementioned capital investment goods (provided they are depreciated over a time period of a minimum of 5 years). The adjustment period for such services will be 5 years.
Refund of VAT to non-registered foreign taxable persons
Taxable persons established in another EU member state (or the equivalent if based elsewhere, e.g. outside the EU), are entitled to claim a refund of input through the 8th or 13th Directive procedure, provided these persons are not obliged to register for VAT purposes in Belgium. In the latter case input VAT must be reported in the Belgian VAT return.
A maximum of one claim can be made per quarter. The minimum limits for claims for EU or non-EU businesses are:
o 200 EUR per quarter (or periods less than one year);
o 25 EUR per year (or balance of a year).
Claims for a year must be based on the calendar year ending on December 31.
The tax authorities must receive the claim within three years of January 1 of the year following the calendar year in which the VAT was incurred.
The claim must be made by filing a refund application form in triplicate (either in Dutch, French or German). The form must be filed at the Central VAT Office for Foreign Taxpayers. As supporting documentation, a certificate of status issued by the VAT authorities of the member state of establishment must be provided by foreign EU taxable persons. Non-EU taxable persons must prove to the Belgian tax authorities that, had they been based in Belgium, their activities would have been subject to VAT.
Original invoices/import documents, bills, vouchers, receipts or customs clearance forms must be submitted along with any claim. The invoices must be in accordance with the requirements of Belgian VAT legislation.
VAT return
The periodic VAT return covers a month. Taxable persons can opt to file quarterly depending on whether or not supplies exceed the threshold of 1,000,000 EUR on a yearly basis. (This option is not available to taxable persons active in the mineral oil sector).
Please note that in certain cases, non-VAT registered persons can become liable to pay VAT (e.g. a life insurance company receiving consultancy services from abroad, a private person importing a car, a city that wants to sell a new building without registration duties etc). In such cases these persons must notify the Belgian VAT authorities and file special non-periodical VAT returns.
The due date for submitting a VAT return is the 20th of the month after the covered month or quarter. The VAT is due when the return must be filed. Taxpayers who file quarterly must pay an amount in the first and second months of the quarter.
Taxpayers who file monthly must pay an amount at the end of December, for December operations. All payments must be made by bank transfer.
If the business is in a refund situation, the refundable amount is carried forward to the next period. Repayments can be requested each calendar quarter.
Monthly repayments are possible for monthly taxable persons who are performing important zero-rated operations with respect to goods (subject to conditions).
At present, VAT taxpayers have 4 options for filing their periodic VAT returns:
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On paper via the official green document (currently only allowed for quarterly tax payers);
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On paper via the automated document that can be printed from an accounting system (currently only allowed for quarterly tax payers);
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Electronically via the EDIVAT system (filing via an electronically secured network - this will disappear at the end of 2008);
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Electronically via the INTERVAT system (filing via the internet).
In principle, the VAT return has to be filed electronically:
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With effect from July 1 2007 for all VAT taxpayers that achieved a turnover in excess of 50,000,000 € in the calendar year 2005;
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With effect from February 1 2008 for all other VAT taxpayers that file VAT returns on a monthly basis;
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With effect from April 1 2009 for all other VAT taxpayers that file VAT returns on a quarterly basis.
Other documents that may have to be filed include:
o A yearly recapitulative statement listing all domestic supplies to businesses that must be VAT registered in Belgium. Electronic filing is mandatory as from the listing related to CY 2008 (i.e. due by 31 March 2009) for monthly VAT return filers and from the listing related to CY 2009 (i.e. due by 31 March 2010) for quarterly VAT return filers;
o An EU sales list when intra-Community supplies of goods are carried out. Electronic filing (INTERVAT) is mandatory as from 1 July 2008 for monthly VAT return filers and as from July 2009 for quarterly VAT return filers;
o Statistical reporting: An Intrastat return for arrivals and dispatches of goods to and from member states other than Belgium.
Anti-abuse measures
In 2007 the concept of "abuse" was introduced into the Belgian VAT legislation (as a consequence of which, a specific arrangement cannot be implemented when the transactions concerned result in a tax advantage contrary to the purpose of the VAT Code (objective circumstances) and the essential purpose of the transactions is to obtain this tax advantage (subjective circumstances)). Therefore, it is important to clearly document that any new arrangement has genuine economic motives.
VAT package
Belgium will have to implement the VAT package as from 1 January 2010 because in December 2007 Ecofin adopted the VAT package containing substantial changes affecting the place of supply for B2C and B2B services, rules on cross-border refunds and administrative cooperation and exchange of information among Member States.
Some of the key changes introduced in the VAT package are:
The general rule for B2B services will be the place where the customer is established, whereas for B2C services the general rule remains unchanged, i.e. where the supplier is established. Exceptions to these rules will be introduced and maintained as well (e.g. cultural services, catering services, services connected to immovable property);
The possibility for Belgium to extend the scope of the 'effective use and enjoyment' provision to a wider range of services if double taxation or non-taxation is likely to arise;
The introduction of a general reverse charge mechanism for B2B services where the place of taxation is deemed to be where the customer is established;
An obligation for the supplier of services to submit recapitulative statements for services supplied to taxable and non-taxable legal persons, where the latter are liable for VAT in their own country;
The place of supply will be the place where the customer is established, in the sense that:
i) The provisions now applicable to non-EU providers of electronically supplied services (ESS) are extended to telecom services and broadcasting services;
ii) From 2015 ESS, telecom services and broadcasting services supplied by an EU provider to an EU customer will be taxed where the customer is established;
The electronic submission of requests, the determination of time limits for completing a refund and the provision of interest for overdue refunds.
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