Annual reporting requirement mixed and partial VAT taxpayers

As a local authority, you may have VAT obligations. Did you know that from 2024, there is an annual reporting requirement for mixed and certain partial VAT taxpayers with a limited right of deduction who use the actual use method? 

We will be pleased to inform you about the new obligations and points of interest.

New reporting requirement

Mixed and certain partial VAT taxpayers will now have to report some information annually, at the latest in the VAT return of the first quarter/first three months:
  • the final general pro rata for the previous calendar year (only relevant if actual use was not applied in the previous year); 
  • the percentage of VAT charged to the taxable person, distinguishing between transactions that:
    • be used only for the activity or activities that give full right to deduction;
    • be used exclusively for the activity or activities that do not confer the right to deduction (i.e. VAT-exempt activities);
    • are allocated to both activities, and on which a special ratio is calculated.
  • the special ratio number that applies. If several special ratios are involved, the overall result of the special ratios applied to the VAT allocated to both types of activities should be communicated.
For 2023, this information must be declared in the VAT return for the second quarter/month of June 2024, for which the filing deadline has been moved to 9 August 2024 in application of the summer scheme.

Administrative tolerances

The Belgian VAT administration did announce some administrative tolerances, which may provide some breathing space in the meantime. 

One such tolerance allows for 2023 that VAT taxpayers may provide the above data based on estimates. It has also been confirmed that it is no longer necessary to communicate final figures. 

In addition, the administration will adopt a lenient attitude should you, as a VAT payer, make an unintentional error in these new obligations. More information on these tolerances can be found in our news release on the BDO website. 

Check the settings of your accounting package!

These tolerances are welcome. Indeed, in our day-to-day advisory practice, we see several local authorities, PCSWs, Care Companies and other mixed and/or partial VAT taxpayers (also from other sectors) struggling with the delivery of a correct calculation of the mandatory data to be shared. 

In this context, we often hear the comment from public sector clients that they only include incoming transactions that can be linked to VAT-taxed activities in the periodic VAT returns. Transactions that can be linked to VAT-exempt activities are then (wrongly) not included in the VAT return. 

This may be due to the settings of the accounting software used when it does not distinguish between (incoming) operations outside the scope of VAT (in principle, not to be included in the VAT return) and VAT-exempt operations (in principle, to be included in the VAT return). 

In practice, we regularly see this, for example, with Care Companies, which grow organically out of PCSWs. Because of their legal form, they do not always qualify as a 'public authority' for VAT purposes. This implies that they carry out more activities within the scope of VAT - and therefore more VAT-exempt activities - than PCSWs. When setting up a Care Company, the settings of the PCSW's accounting package are often adopted.   

This is problematic. In such a situation, if you only report the data from the accounting package, you can provide a completely distorted picture to the VAT authorities. The reported right of deduction is then much larger than the right of deduction you actually enjoyed as a VAT payer. This erroneous reporting could lead to a VAT audit. This is because the new reporting obligation is part of the VAT administration's objective to carry out a stricter, more targeted inspection of the right of deduction of VAT payers with a limited right of deduction.

Strive for accurate reporting as much as possible

Does your board fall under the new regulations? Despite the announced administrative tolerances, we recommend in advance, at least for the year 2024 (to be reported in 2025), to ensure that the accounting processing of incoming operations is done in a way that allows for easy sharing of reportable data. This might save you a troublesome VAT audit.

Contact

Do you have questions about the impact and correct processing of this reporting obligation in your specific case? BDO has now built up far-reaching expertise in this matter, with us now assisting several public sector clients with the practical implications of this obligation.