Proposed changes to the Belgian VAT Act
On 22 April 2021, a draft law containing various Value Added Tax (VAT) provisions was submitted to the Belgian Parliament. The proposed provisions include several changes to the Belgian VAT Act, mainly including the following:
1. Territorial scope: The territorial scope of the VAT legislation will be amended to codify the consequences of the Brexit-agreements. Accordingly, the United Kingdom is as a third country for VAT purposes as from 1 January 2021. However, temporary arrangements apply in relation to Northern-Ireland.
2. Deemed supplies of commercial samples and gifts: The wording of the current provision will be aligned with that of the VAT Directive to clearly indicate that “small value” concerns commercial gifts, rather than commercial samples. Accordingly, the application of commercial gifts of small value, commercial samples, and certain charitable food and other essential non-food products, is not to be treated as a (deemed) supply of goods for consideration. Secondary legislation will specify the scope of this provision, including the permitted value and frequency of commercial gifts as well as the goods excluded from the scope of the provision.
3. Exemption for independent group of persons: The exemption for independent group of persons (IGP) will be subject to further limitations. Under the current rules, the nature of the activities performed by the members of the IGP is not relevant provided that a predominant part of these activities is exempt from VAT and/or is not subject to VAT (i.e. out of scope). However, following the judgements of the Court of Justice of the EU in the Aviva and DNB Banka cases of 21 September 2017 (C-605/15 and C-326/15, respectively), the IGP-exemption should only apply to IGPs whose members perform VAT exempt activities in the public interest (as listed in Article 132 of the VAT Directive). As a result, the IGP-exemption is not meant to apply to services provided by IGPs whose members provide other VAT-exempt services, such as g. financial or insurance services.
The proposed changes reflect the outcome of the above judgements and, accordingly, the IGP-exemption will be limited to apply to situations where the predominant part of the activities of the IGP’s members is not subject to VAT and/or is VAT exempt based on Article 44§§(1)(2) of the Belgian VAT Act. The new rule will generally be effective as from 1 January 2022. However, an earlier effective date will apply to:
a) IGPs established before 1 July 2021 for services provided to members which joined the group after 30 June 2021. In this case the IGP must apply the new rule to the services which it provides to these newly joined members;
b) IGPs which are established after 30 June 2021. In this case the new rules apply as from the date of the IGP’s establishment.
4. Exemption for collective investment funds management: The wording of the exemption for collective funds management will be adjusted to include “institutions for investments in debt securities”.
5. Call-off stock registers and VAT Groups: The creation of a VAT Group generally implies that its members lose their status as VAT taxable persons to the benefit of the VAT group itself. However, certain obligations remain with the members, such as the filing requirements of the annual client listing and the monthly European Sales Listing. To ensure consistency, the relevant provisions of the call-off stock regime will be changed to waive VAT Groups from the obligation to maintain registers on the call-off stocks and to impose this on the individual members of the VAT Group.
6. Persons entitled to VAT refund: A general legal basis will be created for VAT refund procedures whereby VAT is refunded to a person that is not entitled to the refund under the standard rules. Based on secondary legislation, such procedures are already in place for specific situations (g. when goods or services are supplied to diplomatic services), but a codified legal basis is not provided. As for administrative simplification purposes it is useful to have procedures whereby VAT is directly refunded to a person that is normally not entitled to the refund (e.g. recognised administrative intermediary), the proposed provisions include a codification of the concept of “persons entitled to VAT refund”.
Other provisions are also adjusted in the proposal (e.g. re-drafting of the provisions on VAT rates), but those changes are rather formal and are not intended to change the rules embedded therein. We keep you informed about relevant developments and the adoption of the proposed draft law. In the meanwhile, if you have any questions on the above listed changes or how the proposed changes may affect your business, do not hesitate to reach out to us.