When do you need to register for VAT in Belgium?
Foreign companies which carry out specific commercial activities in Belgium, may be required to submit VAT returns and consequently have to register for VAT purposes in Belgium. These companies should make sure that the Belgian VAT regulations are respected.
VAT identification is mandatory when the foreign company not established in Belgium carries out transactions for which it is liable for tax (transactions carried out with customers not identified for VAT purposes in Belgium) or for which it must complete reporting formalities in Belgium (intra-Community acquisitions, export supplies, intra-Community supplies, imports followed by an intra-Community supply known as “regime 42”).
There are however derogations or possible scenarios avoiding or allowing a VAT registration.
VAT registration directly or through a VAT representative
VAT is normally due by the supplier of goods or the service provider (general rule). Where, therefore, a foreign company carries out taxable operations in Belgium for which it is liable for VAT, it must charge Belgian VAT to its client. In order to do so, it must register for VAT purposes either directly or either through a VAT representative.
- EU companies should register directly with the tax office for foreign companies. They can, however, appoint an agent to act on their behalf, nevertheless they alone remain liable for the tax.
- Non-EU companies should be registered with a individual VAT representative. The tax representative undertakes to complete the formalities required of the person who as appointed him (making the statement of establishment, book-keeping, signing turnover returns and paying the tax). The tax representative is legally responsible for meeting his obligations and legally liable for the tax owed. The tax representative has the same rights as all other taxable person.
Combined with the general reverse charge mechanism applicable in Belgium, the option for a EU company to appoint a fiscal representative can be useful in order to avoid cash flow inconvenience. Indeed, that mechanism makes the client liable for VAT (instead of the supplier) provided the latter is a Belgian business submitting periodical returns or a foreign company identified for VAT purposes in Belgium with a fiscal representative.
VAT Obligations
When VAT registered, foreign companies have to deal with their VAT obligations, i.e. filing periodical VAT returns, keeping of books and records, VAT accounting, issuance of invoices, payment of VAT, invoices with mandatory information, etc.
See our newsletter: “invoicing rules in Belgium”
VAT Optimization
There are some optimized scenarios available for companies having business in Belgium:
- Reverse charge mechanism : The generalized reverse charge mechanism has been introduced in Belgium since 2002 and is applicable to all supplies of goods and services that are deemed to take place in Belgium and performed by a taxable person not established in Belgium (i.e. established in another EU Member state or outside the EU) to a customer established in Belgium and filing periodical Belgian VAT returns or not established in Belgium but being VAT registered in Belgium and having appointed a fiscal representative.
- VAT warehousing arrangements;
- Licence N°ET 14.000 : Specific license for importers allowing to defer payment of VAT due upon importation
Recovery of input VAT
VAT incurred on the purchases, importations or intra-EU acquisitions of goods and services may be recovered by a foreign company provided these expenses are intended for taxable activities and at the condition that proper documentation is available.
No input VAT can be recovered on any of the following expenditures:
- Entertainment ;
- Accommodation hotel, catering and restaurants, unless (1) the costs are incurred for employees in charge of supplying goods or providing services away from the business premises or (2) the costs are rebilled to other business who in turn supplies the same services;
- Up to 50% of input VAT incurred on passenger vehicles is recoverable. This restriction also applies to VAT charged on the supply of services and goods related to such cars (fuel, maintenance, etc.).
A foreign company is allowed to deduct input VAT through periodical VAT returns. It is entitled to recover input VAT for the period in which the invoice is issued. The deduction of input VAT must be documented by an invoice that is issued in accordance with all Belgian VAT requirements.
Foreign companies which are not VAT registered in Belgium are allowed to recover Belgian VAT incurred on their expenses via the electronic procedure as laid down by Directive 2008/9 (for EU companies) or by 13th Directive (for non-EU companies).