TRANSITION PERIOD FOR THE CHARGEABILITY OF VAT EXTENDED ONCE AGAIN

As a recap: the new rules on VAT chargeability

Supply of goods and services for which no reverse charge of VAT is applicable

Since 1 January, when issuing advance invoices for the supply of goods/services for which the reverse charge mechanism applies, the VAT payer has the choice to either apply:

• the new regulation: the VAT payer issues a document, other than an invoice (e.g. payment notice). This “other document” may not refer to the VAT rate, or the reason for not charging VAT. This document does not trigger the chargeability of VAT in hands of the supplier, nor the deductibility of VAT in hands of the customer. The actual invoice needs to be issued at the moment the VAT becomes chargeable (i.e. payment received, or supply of the goods/services has been completed);
• the new tolerance for advance invoices (i.e. said transitional measures): the taxpayer issues a compliant advance invoice with VAT, for which no corrective document needs to be issued afterwards.

In respect of advance invoices (in a B2B context) the following rules apply from now on.

Immediate deductibility of VAT (by customers) and a 3-month window/regularization period

• The supplier issues an advance invoice with VAT which makes reference to the probable/ultimate payment date, or the probable date of chargeability (i.e. date when the supply of goods/services has been completed);
• The customer may deduct the input VAT of such an advance invoice immediately in the month/quarter in which the advance invoice has been issued, regardless the payment date;
• The customer has a 3 month “window period” in which proof of chargeability must be provided. This period starts at the end of the month in which the advance invoice has been issued. If no proof of chargeability (payment or taxable event) can be provided within this window period, the customer must regularise the VAT deducted (box 59 of the VAT return) through box 61 of the VAT return;
• The supplier may choose to either report and account for the VAT due, based on the invoice date, or to report and pay the VAT upon collection from the customer;
• Specific rules have been developed for situations in which the VAT charged needs to be corrected, the customer goes bankrupt, etc.

For the supply of goods/services for which the reverse charge mechanism applies, a similar tolerance exists. 

No tolerance exists in hands of the supplier for intra-Community transactions  because of the cross-border situation and correct reporting in other EU Member States. In hands of the (Belgian) customer, the Belgian VAT Authorities accept that incoming intra-Community acquisitions of goods/services are being reported in the month/quarter in which the (advance) invoice has been issued.

Accounting software not yet updated?

These new chargeability rules imply that VAT payers need to make some adjustments:

• Provide for compliant advance invoices that meet the specific invoicing requirements (e.g. the probable/ultimate payment date, or the probable date of chargeability);
• Creditors should implement an (automatic) process to follow-up the 3 month window period and to regularisations when necessary (via box 61);
• Debtors can implement an (automatic) process for situations in which the supplier decides to report and pay the VAT due based on payment date, rather than the invoice date.

These new rules require the accounting software to be updated. That is why the VAT authorities adopted the new tolerance in October of last year , allowing VAT payers to apply the old chargeability rules until 30 June 2015 by means of transitional measures.

This implies that in case of receipt of an advance payment before the goods were supplied or completion of the service, the supplier can still charge VAT on the advance invoice. The customer can still deduct the VAT on these advance invoices if if payment was not yet effected.

Transition period extended

While awaiting a new law amendment in respect of the chargeability of VAT, the transitional measuers have been extended for an unlimited period of time.

Contact

Should you have any further question or should you require a personal advice with respect to the impact of these rules on your company, please contact your usual contact person at BDO or you may send an email to [email protected] for the attention of one of the members of the Competence Center VAT:

• Erwin Boumans, 02/778.01.00
• Pascal Dauw, 09/210.54.10
• Kaatje Bondewel, 02/778.01.00
• Brigitte Braeckmans, 03/230.58.40
• Joëlle Teuwen, 081/ 20 87 87