VAT Deduction based on actual use: is retroactive registration in Belgium still an option?

Oct 2
As a general rule, mixed taxpayers should apply Article 46, § 1 of the VAT Code to exercise their right to deduction. Only when the taxpayer specifically requests it or when it is imposed, VAT deduction should be exercised via the system of actual use (Article 46, § 2 VAT Code). Taxpayers wishing to apply actual use must register 'previously' through an electronic notification. This notification must be sent 'no later than the end of the first reporting period of the current calendar year' (Article 18bis, § 1, second paragraph Royal Decree No. 3).
For taxpayers who applied actual use before 2023, there is a transitional procedure that expired on June 30, 2023 (Article 18bis, § 7 of Royal Decree No. 3). If this timing is missed, the switch can only be made from the following calendar year, provided that a new notification is made in a timely manner (Article 18bis, § 3 Royal Decree No. 3).

In other words, if there has been no timely prior notification in 2023, the right to deduction cannot, in principle, be exercised based on actual use for that year, and it will only be possible to apply actual use from 2024 onwards, provided that a notification is made before January 31, 2024.

The VAT authorities only accept corrections in very exceptional cases while considering the principles of actual use for previous calendar years, provided it is demonstrated that the taxpayer acted in good faith.

The administrative comments express this as follows (paragraph 5.2.3. of Circular 2023/C/63 dated June 21, 2023): "Only in very exceptional cases will a correction, taking into account the principles of actual use, be possible for previous calendar years. The taxpayer who was acting in good faith when choosing their deduction method must be able to demonstrate adequately that they were unaware that a transaction they considered exempt or taxable was, in reality, not exempt or not taxable, and that the change of deduction method allows for a more accurate determination of the portion of VAT related to the right to deduction. This will only be the case if there is a correction of the taxpayer's tax situation, either as part of an audit or as a result of a voluntary correction by the taxpayer. This taxpayer can submit a request to the tax authorities to simultaneously make a correction for previous calendar years when the deduction according to actual use takes effect.”

Despite this strict official stance of the authorities that retroactive registration for 2023 is, in principle, not possible, we are picking up signals that it is being tolerated in practice, and the authorities are taking a more lenient approach. We already have some precedents where retroactive registration has been allowed, with a maximum penalty of €100 per month of delay imposed. These penalties are automatically due, but they can be waived through a request, in accordance with the current penalty policy.

We are likely to receive an official announcement soon, in which the stance regarding retroactive registration will be revisited...
To be continued!