New rules for the chargeability of VAT restore the central role of the invoice
Throughout the past few years, Belgium has witnessed several changes with respect to the rules to determine the chargeability of VAT.
According to the Belgian VAT legislation, the moment of supply of the goods or services makes VAT becomes due. In other words, the VAT amount becomes payable towards the Belgian Treasury.
In addition to this main rule, there are also a number of subsidiary causes for the chargeability of VAT. This means that certain events will give cause for the VAT to become due when they take place prior to the moment of supply of the goods or services.
These rules have been adapted several times in the past few years.
Before 2013, VAT was due when the invoice was issued or paid in case this event took place before the moment of supply of the goods or services.
As from 2013, the moment of issuance of the invoice no longer implied that the VAT on local supplies was due. In practice however, this gave rise to practical difficulties for VAT taxable persons. Therefore, the tax authorities decided to provide some administrative guidelines.
New key role of the invoice
As from 2016, the moment of issuance of an invoice regains its importance to determine the moment of chargeability of VAT on local supplies. In practice, the moment of chargeability of VAT is important as this determines in which periodic VAT return the VAT is to be reported.
Indeed, from now on the VAT is due at the moment of issuance of the invoice, irrespective of whether the supplier issues the invoice before or after the moment of the supply of the goods or services. VAT will in any case be due on the 15th of the month following the month in which the supply of the goods or services has taken place, if no invoice was issued before this date. Payment before the supply of the goods or services takes place also remains to be a subsidiary cause for the chargeability of VAT.
Furthermore, for the supplies of goods or services to ‘public bodies’ (B2G-relations), VAT is due upon receipt of the payment by the public body. This rule was adopted to avoid that the supplier needs to prefinance the VAT due. Of course, this system will not be applicable in situations where the reverse charge mechanism is applicable, as in that case there is no prefinancing of VAT by the supplier.
6% VAT rate for renovation work
From 1 January 2016, the reduced 6% VAT rate will only remain applicable for the renovation of dwellings which are at least 10 years old. Dwellings that do not meet this requirement are now subject to the standard VAT rate of 21%.
Also a transitional measure was adopted which aims to temper the consequences of the modified requirement. This means that under the following conditions, the 6% VAT rate still applies:
- the immovable property was occupied for the first time in 2007, 2008, 2009 or 2010;
- the constructions works planned should qualify for the reduced 6% VAT rate;
- the agreement, building permit or the notification form related to these works should be dated before 31 December 2015;
- the invoice should be issued at the latest on 31 December 2017.
VAT deduction of mixed-used business assets
Since 2011 the VAT deduction for mixed-used business assets (used for both professional and private purposes) is limited depending on the actual professional use of the asset. For company cars other than fiscal light trucks,three different calculation methods apply to determine the amount of VAT deductible, taking into account a deduction limit of 50%. Separate calculation methods are applicable for fiscal light trucks.
In essence, there are no changes to the existing rules and application scope. However, a new circular letter (circ. AAFISC nr. 36/2015 (nr. E.T.119.650) dd. 23.11.2015) was published by the VAT authorities end of November 2015. This circular letter aims to coordinate the existing Administrative Decisions in this respect. It also clarifies the current rules and introduces new tolerances to enhance the practical usability of the VAT deduction rules.
- Payment of a contribution: the circular letter clarifies some of the situations where a business asset is put at the disposal of the beneficiary either for free or with payment for the private use. Indeed, only business assets for which the beneficiary does not pay a contribution for the private use are subject to the VAT deduction limitation, depending the actual professional use.
If a contribution is paid by the beneficiary of the car, this is to be considered as a VAT-taxable rent of a business asset. VAT is payable by the taxable person based on the ‘normal value’ of the asset. The 50% VAT deduction limitation which applies to company cars (other than fiscal light trucks) should, nevertheless, always be taken into account.
- the reduction of the director’s, company manager’s or employee’s salary by the amount of the benefit in kind is to be considered a contribution for the private use of the business asset;
- payment of additional options by the beneficiary of a company car: whether or not this is to be considered a contribution, is a factual matter that should be in line with the applicable car policy of the company. However, if the company car is made available without consideration, but with the possibility for the beneficiary to choose certain car options for which he pays a one-time contribution, the VAT authorities will assume that the car is still made available without consideration, which gives cause for limitation of the input VAT that can be deducted.
- Commuting (= private use): this is the route from the place of residence to the place of work. The circular letter elaborates on some specific cases and also introduces some new administrative tolerances (e.g. for employees in the construction sector). It is also clearly stated that the “40-days rule”, which applies for income taxes, is not applicable to determine the place of work for VAT purposes.
Clarifications with respect to the three calculation methods for company cars (other than fiscal light trucks)
The circular letter refers to the three existing methods for the calculation of the VAT deduction on company cars to provide some additional clarifications and to introduce new tolerances. For example, sales representatives (an employment contract as a sales representative is required) are exempt from the obligation to keep a logbook when applying the first calculation method.
The second method (semi-fixed method) can be applied if the vehicle has only one fixed user and provided that there is only one vehicle per user. A third condition has now been added: the vehicle should be used as a working tool or as a business asset. Professional use of less than 10% is deemed to be an insignificant professional use. If the asset is put at the disposal of the user as part of the compensation policy of the company, the Belgian tax authorities will assume that the vehicle is actually used as a working tool or business asset. This is also a factual matter. Taxable persons can opt to conclude a preliminary agreement (ruling) with the authorities in order to obtain more legal certainty.
The third method (fixed VAT deduction rate of 35%) only applies for one vehicle per user. For other vehicles which the beneficiary may use for private purposes the professional use is to be demonstrated by applying the first method (a logbook of the driven distances). Also in this case it is required that the vehicle is used as a working tool or as a business asset.
Other movable business assets
In relation to other movable business assets, the circular letter confirms the application of the general fixed VAT deduction rate of 75%. This fixed rate is not applicable for input VAT regarding:
- movable property which is used exclusively for professional purposes;
- electricity and heating: under certain conditions VAT can be paid on the benefit in kind as determined for direct tax purposes (in which case the benefit is deemed to be VAT inclusive);
- In case only a fuel card is put at the disposal (without company car): the VAT deduction should be determined based on the factual circumstances and with a deduction limit of 50%.
Furthermore, the circular letter elaborates on the VAT deduction rules for so-called mixed taxable persons in case of mixed-used business assets .
VAT status for director companies
Companies which act as a director, manager or liquidator of another company were meant to be subject to the normal VAT rules as of 1 January 2016. This implies that the possibility to remain outside the scope of VAT would no longer possible, requiring director companies to register for VAT and charge VAT on their services.
With the Administrative Decision nr. E.T.125.180 dd. 20.11.2015, this regulation is being postponed until 1 April 2016.
Small enterprises: increase of the threshold to EUR 25.000
The threshold for the application of the special VAT scheme for small enterprises (art. 56bis of the Belgian VAT code) has been increased from EUR 15.000 to EUR 25.000.
Taxable persons, who would like to make use of this exemption regime, can apply for this exemption regime as from 1 July 2016 if the threshold of EUR 25.000 has not been exceeded in 2015. To this end, the competent local VAT authorities are to be notified by registered mail before 1 June 2016.
Taxable persons who choose to switch from the normal VAT regime to the exemption scheme should bear in mind that, when applying this exemption regime, they will no longer have a right to input VAT deduction. Moreover, a VAT-revision will be required for business assets within the revision period.
21% on separately sold digital newspapers and magazines
Following a notice by the European Commission, Belgium has decided to submit separately sold digital newspapers, magazines and articles to VAT at the standard VAT rate of 21% (Decision nr. E.T.128.250 dd. 30.11.2015).
According to the Commission, such online publications are deemed to be electronically supplied services which are excluded from the reduced VAT rate.
Reduced 6% VAT rate for school buildings
A new category “XL. School buildings” has been added to table A of the annex to Royal Decree nr. 20 of 20 July 1970. Although the Council of State has stated in her advice that the application of the reduced VAT rate cannot be applied according to the VAT directive, the reduced VAT rate is applicable as from 1 January 2016 for the following activities:
- The construction of school buildings and the transfer of rights in rem with respect to school buildings, insofar as the transaction is not exempt under art. 44, §3, 1° of the Belgian VAT Code;
- Construction work, excluding cleaning, regarding a school building;
- Leasing operations in connection with a school building.
Should you have any further question or 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 Centre 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