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Indirect tax snapshot
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Value Added Tax (VAT) is the principal type of indirect taxation in Belgium and in other European Union (EU) countries.
It is a tax on consumption applied during the production and distribution process of most goods and services. It is applied on goods and certain services entering Belgium as well as supplies of goods and services located in Belgium. Although VAT is ultimately borne by the consumer as it is included in the price paid, the responsibility for charging, collecting and paying it to the tax authority at each stage of the process rests, in principle, with the business making the supply of goods or services.
A transaction is within the scope of Belgian VAT and should be reported in the Belgian VAT return if the following conditions are met:
- it concerns one of the below mentioned taxable transactions under consideration: supply of goods, supply of services, intra-Community supply/acquisition of goods or importation.
- Supply of goods is defined as a transfer of the power to dispose of goods pursuant to a contract under consideration.
- Supply of services is defined as any transaction which is not considered as a supply of goods under consideration.
- Intra-Community supply is a supply of goods under consideration with transport of goods from Belgium to another EU member
- Intra-Community acquisition is the arrival of goods under consideration in Belgium coming from another EU Member state.
- Importation of goods means that non-EU goods are brought in ‘free circulation’ in Belgium and are released for use in the home EU market
- if the above transactions are taking place in Belgium
- if the above transactions are made by a taxable person
- and when it is made in the course or furtherance of any business carried on by that person or entity.
A business registered for the VAT will charge VAT (output VAT) on its sales (unless payment of the Belgian VAT is shifted to the customer -) and will incur VAT (input VAT) on its purchases (including any VAT paid at importation).
The difference between the output VAT and the deductible input VAT in each accounting period (i.e. month or quarter) will result in either:
- VAT amount payable by the business to the VAT authority
- VAT credit amount, for which a refund can be claimed at the end of the quarter
- zero balance (e.g. when only incoming transactions for which the VAT should be self-accounted for and only VAT exempt outgoing transactions are performed).
There are four rates of VAT that are applied to goods and services in Belgium:
- standard rate (21%)
- reduced rate (6%)
- intermediate rate (12%)
- zero rate.
Also, a range of VAT exemptions applies, some with VAT deduction right, such as export and intra-Community supplies, and some without VAT deduction right, such as financial and insurance services, medical services, rent of real estate (with exceptions) and cultural and sport-related services. Businesses that make exempt supplies without VAT deduction right are unable to claim all of the input tax that they incur, so the VAT paid to suppliers will be a ‘real’ cost.
Most goods imported into Belgium from outside the EU are subject to VAT. The import VAT will have to be paid by the importer at the time of importation. When the importation is for business purposes and the importer is registered for VAT, it may be possible to reclaim the VAT via the Belgian VAT return (subject to certain rules). Under certain conditions, an import VAT deferral licence (so-called ET 14.000 licence) can be requested. This means that the import VAT is to be declared by the importer under a ‘self- assessment’ scheme: the VAT payable and the deductible VAT will be mentioned in the same Belgian VAT return. This system avoids pre-financing of the Belgian VAT by the importer.
It is also important to note the interaction between VAT and customs duty. Customs duty is levied across the EU at the place where goods are imported into the community. It is levied in order to bring the cost of goods produced outside the EU up to the same level as those produced within the EU. Once customs duties (and VAT) have been paid by the importer, the goods are in ‘free circulation’ and can then be released for use in the home market. Unlike other indirect taxes, such as VAT, once the custom duty has been paid, it is usually not recoverable by the importer. Consequently, it therefore represents a bottom-line cost to the importing business, if it cannot be passed on at higher prices. VAT is charged on the value of the importation, including any customs duty.
In Belgium, there is no registration limit for VAT. However, for companies established in Belgium, there is a special regime, the so-called ‘small enterprises regime’. Such small enterprises whose annual turnover is below €25,000 (excl.VAT, threshold since 1 January 2016) can benefit from a VAT exemption on the performed supply of goods and services (without VAT deduction right). Some goods and services and sectors are excluded from the special regime (e.g. immovable work sector, hospitality sector, tobacco products).
However, foreign taxable persons cannot apply this special VAT regime.
A lump-sum penalty may be imposed by the tax authorities, if a taxable person fails to register at the appropriate time, as well as lump-sum penalties per VAT return, yearly sales listing and intra- Community supply listing not submitted for the related period.
For these purposes, a ‘taxable person’ includes any legal entity, also non-profit organisations, which meets the conditions to be regarded as acting in a business capacity are subject to VAT.
Two or more corporate bodies can be registered together as a VAT group if:
- each of the bodies is established, or has a fixed establishment, in Belgium
- they comply with the three ‘control and links’ test, e. financial, organisational and economical link
- all bodies should qualify as VAT taxable One single VAT return should be submitted for the VAT group.
A corporate body cannot be a member of more than one VAT group at a time. The main advantage of a VAT group is that in principle any supply of goods or services by a member of the group to another member is disregarded for VAT purposes. This results in advantages: (1) VAT optimised structuring for immovable property within the group, (2) avoidance of double VAT deduction limitation, (3) optimising VAT pre-financing and (4) avoidance of VAT risk for intra-group transactions.
There are also some disadvantages, for example all VAT group members (including former members) are jointly and severally liable for the VAT debt of the group during the period of their membership. Consequently, any decision on whether a VAT group is opportune should be taken with care.
All non-established businesses require to be registered for VAT in Belgium as soon as they commence trading in Belgium, irrespective of the level of turnover (except for distance selling).
For occasional/one-off transactions a simplified procedure exists with a licence for non-registration and filing of a special (one-off or a few) VAT return. In such case, no Belgian VAT number (only a so-called ‘reference number’) will be assigned and Belgian input VAT will be recoverable via the special (one-off or few) VAT return.
In some cases, a special registration procedure can be applied for organisers of events such as conferences in Belgium. One of the conditions to apply this special procedure is that the Belgian turnover cannot be more than €200.000 on a yearly basis. In such case, special returns will have to be filed to pay the VAT due and deduct the incoming VAT.
Registration for VAT in Belgium may also be required where a non-established EU business is involved with distance selling. Distance selling occurs when a taxable supplier in one EU country supplies and delivers goods to a non-taxable customer in another EU country who is not (liable to be) VAT registered. Non-taxable customers include private individuals, and businesses and other organisations not registered for VAT (either because of their size or the fact that they are exempt from having to register due to the nature of their activities).
Under a certain threshold these distance sales will be subject to VAT at the appropriate rate in the suppliers’ country. One can however also immediately opt to pay VAT of and in the recipients country.
Since 1 July 2021, a Maximum EU threshold of €10,000 applies for telecommunications, broadcasting and electronic services as well as distance sales to private persons. Above said threshold, a taxable person will need to register for VAT purposes in the EU Member state where the supply is taking place. In this respect, one can opt to use the new EU OSS-registration system (centralized filing and payment of EU VAT returns related to different EU Member states in one EU Member State) or individually register for/pay VAT per EU Member state where transactions are taking place.
The place of supply for electronically supplied services provided to private consumers (B2C) is the Member State where the consumer is established. This Member State determines amongst others the applicable VAT rate.
Suppliers have the choice to either register for VAT in each Member State where their customers reside, or elect to register under the EU VAT OSS simplification scheme in a single Member State.
A taxable person can operate non-union OSS (if the supplier is established in a third country and not in the EU) or Union OSS (if the supplier is established in the EU).
The (non-union/union) OSS cannot be used to report local sales of services to customers in Belgium if the supplier of electronically supplied services is also established in Belgium and is having also a normal VAT registration number in Belgium.
Foreign companies that perform taxable transactions in Belgium in principle need to obtain a Belgian VAT number. More specifically, an individual VAT number is required. In that respect, EU companies can choose between a direct VAT identification and appointing a fiscal representative. Non-EU companies are obliged to appoint a fiscal representative.
For certain limited transactions instead of requesting an individual VAT number, the Belgian VAT reporting can be done under a special global VAT registration number (BE 0796.5 or BE 0796.6) assigned to a global fiscal representative. This is the case for example for:
- importation followed by a local supply of the same (untreated) goods
- non-Community goods sold under a VAT warehouse regime.
Under this system, the global VAT representative will submit a single VAT return for multiple taxable persons.
For occasional/one-off transactions, a simplified procedure exists with a licence for non-registration and filing of a special (one-off or few) VAT return (see above).
In principle, a monthly VAT return has to be submitted. However, if the annual turnover realised in Belgium does not exceed €2.5 million, quarterly VAT returns may be filed (option). At the moment that the amount of intra-Community supplies of goods exceeds the threshold of €50,000 per quarter, monthly ESLs and monthly VAT returns have to be submitted.
For companies trading in certain products, a monthly VAT return is obligatory if the annual turnover is more than €250,000 (i.e. energy products, mobile phones and computers and their peripherals, accessories and components, as well as land vehicles).
All VAT returns have to be submitted within 20 days after the end of the relevant accounting period (month or quarter), together with the payment of any VAT amount due. Where VAT recoverable exceeds VAT payable, a refund of VAT will, in principle, will be paid by the VAT authorities on a quarterly basis (a special box is to be ticked on the VAT return).
Businesses that are regularly in a net repayment position (because of the nature of their outgoing activities) can ask for a monthly VAT recovery licence. This will be the case when a taxable person mainly exports or supplies goods to other member states, but also in cases where a refund position is caused by reverse charge, an authorisation may be granted for monthly refunds (license for monthly VAT refund).
Where VAT payable exceeds VAT recoverable, the difference has to be paid by the 20th of the month following the tax period (month or quarter).
For the late filing of a VAT return, the Belgian VAT authorities can impose a VAT penalty of €100 per VAT return with a maximum of €1,000. For late payment of the VAT amount due, in principle (only) interests for late payment at 0.8% per month will be imposed.
Please note the VAT code also foresees that a VAT penalty of 20% can be imposed. If several VAT returns are outstanding, a special VAT account is opened. As from this date, the VAT penalty of 20% on the VAT amount due will be claimed in practice and is accumulated with interest for late payment at 0.8% per month. In such cases, the directors are jointly and severally liable with the company.
Businesses registered for VAT purposes in Belgium and making supplies of goods or services to recipients registered for VAT in another EU country are required to submit EC Sales Lists (ESL’S). The ESLs have to mention the VAT number of the recipients of the goods or services. Since 1 January 2020, such ESL return should also be prepared in the framework of goods falling under the EU simplified call-off stock arrangement.
At the moment that the amount of intra-Community supplies of goods exceeds the threshold of €50,000 per quarter, monthly ESLs have to be submitted. Below the threshold, quality ESLs may be submitted (by option) unless the company is obliged or is filing monthly VAT returns (threshold of €2.5 million).
The ESL has to be filed no later than the 20th of the month following the month or quarter concerned. Where a VAT payer has no supplies of goods and/or services to other member states, no ESL has to be filed for that particular month or quarter. In the case of a VAT group, each member of the VAT group has to submit its own ESL.
In addition, if the value of the intra-EU transactions of goods dispatched to or arriving from another EU country is above the annual threshold (resp. €1.000.000 and €1.500.000) a supplementary declaration (the so-called intrastate arrival and dispatch declaration has to be submitted on a monthly
Finally, each year a listing of the supplies to Belgian customers registered with a VAT number in Belgium has to be filed (this so-called ‘Annual sales listing’). The yearly sales listing includes the following information:
- VAT number of the clients
- total turnover per client
- total amount of VAT
The Annual Sales Listing has to be filed by 31 March of the following year. If no supplies to Belgian customers registered with VAT in Belgium have been made during a year, the VAT authorities have to be notified (by ticking a box on the VAT return or nil yearly sales listing).
In the case of a VAT group, each member of the VAT group has to submit its own annual sales listing.
For a range of errors and omissions resulting in non-compliance with the VAT rules, administrative VAT penalties can be imposed. There are two types of VAT penalties: (reduced) proportional penalties and lump-sum penalties. In addition to the penalties, interests for late payment at 0,8% per month can be claimed. In case of a spontaneous VAT regularization (prior to any intervention/question of any tax authority no proportional penalty will be due).
In case the infraction was committed with the intention to evade VAT or to facilitate VAT evasion, a 200% VAT penalty will be claimed. In other cases, reduced proportional VAT penalties apply, ranging between 5% and 100% (for some breaches, a difference is made whether it concerns the first, second or next breach). Criminal proceedings and penal sanctions may arise in the case of more serious matters (e.g. fraud).
The Belgian VAT legislation foresees the following VAT penalties:
|None or late payment of Belgian VAT||20%|
|Non-issuance of an invoice||100%|
|Certain incorrect invoice statements||100%|
|Non-issuance import document||25%|
|Incorrect application of reverse charge||20%|
|Incorrect VAT dDeduction||10%|
|Incorrect application of a VAT exemption||10%|
Lump-sum penalties ranging between €50 and €5,000 are foreseen for other breaches of the VAT code. The penalty will depend on the nature and severity of the breach (e.g. €3,000 for the non-filing of the yearly sales listing and €250 per invoice with a maximum of €5,000 per breach for mistakes regarding obligatory (but not highly essential) invoice statements. For other breaches such as a failure to maintain adequate records, not providing information (including answering to questions of the VAT authorities) or (repeated) mistakes in the VAT reporting other lump sum penalties can be imposed.
Only in case a foreign company is not obliged to register for VAT purposes in Belgium, it is possible to reclaim the VAT incurred in certain circumstances and consider Belgian VAT deduction limitation rules.
Two schemes exist, one for businesses established in the EU (procedure under Directive 2008/09/EC, formerly 8th Directive procedure) and another for businesses established outside the EU (13th VAT Directive 86/560/EEC).
In both cases the claim has to be made by 30 September of the following year. . The claim period in Belgium is from 1 January to 31 December each year (or at least per quarter with exception for the remainder of the year).
Businesses established in the EU
The EU cross border refund scheme is available in all EU member states, and enables a business established in another EU country to recover Belgian VAT incurred. To be eligible to make a claim, the claimant has to be a taxable person established in an EU member state other than the one from which the claim is sought. In addition, the claimant:
- may not be registered, liable or eligible to be registered in the member state from which he is claiming the refund
- may not have a fixed establishment, seat of economic activity, place of business or other residence there.
The claim is submitted electronically in the country of establishment and will subsequently be sent over to the VAT authority from whom the repayment is being sought. The refund period could not cover more than one calendar year or less than three calendar months – unless it is covering the remainder of a calendar year. The minimum amount for a refund application is €400 (unless the application relates to a total calendar year or the remainder of a calendar year: minimum of €50).
The amount that is refundable is determined by the Belgian VAT deduction limitation rules. The general threshold for the submission of an electronic copy of an invoice is where the taxable basis on the invoice or import document is €1,000 or more (€250 for invoices relating to fuel costs). The serial number used in the application form should be included in the documents.
Businesses established outside the EU
Businesses established outside of the EU can, subject to certain conditions, also reclaim the VAT incurred on imports into Belgium or purchases of goods and services used in Belgium. The scheme is available to any person carrying on a business when being established outside the EU, provided that in the period of the claim:
- they were not registered or liable to be registered for VAT in Belgium
- they were not established in any EU
The minimum amount for a refund application is €200 (unless the application relates to a total calendar year or the remainder of a calendar: minimum of €25). A specific paper claim form has to be submitted to the Belgium VAT authority no later than 30 September of the following year.
A VAT invoice has to show:
- an invoice number that is unique and sequential
- seller’s name, address and VAT registration number
- invoice date
- date of taxable event if it differs from the invoice date
- customer’s name, address and VAT registration number (if any)
- proper description sufficient to identify the goods or services supplied to the customer
- rate of any cash discount
- per VAT rate the total amount of VAT charged expressed in Euros.
For each different type of item listed on the invoice, the following has to be shown:
- unit price or rate, excluding VAT
- quantity of goods or the extent of the services
- applicable VAT rate
- total amount payable (taxable amount), excluding VAT.
Where a VAT invoice includes zero-rated or exempt goods or services, it has to:
- refer to the reason for not charging VAT (such as reference to the article of VAT exemption in the Belgian VAT code or VAT Directive)
- refer to the reverse charge mechanism if the VAT is due by the customer (invoice reference: ’btw verlegd’)
- show the total of those values.
Electronic invoices have to contain the same information as paper invoices. The method used to ensure the authenticity of origin, the integrity of content and legibility of the invoices is a business choice and can be achieved by any business controls which create a reliable audit trail between an invoice and a supply of goods or services. There is no need to request a special license from the VAT authorities.
In Belgium, there are currently no SAF-T or other similar electronic protocols foreseen and neither has there been any announcement of implementation in that respect.
For further information on indirect tax in Belgium please contact: