Belgium on its way to implementing mandatory B2B E-Invoicing

An impressive list of countries has already made or are planning to introduce e-invoicing mandates. The primary motivation for these countries is to address the VAT gap, an amount that runs into billions and which the government has been unable to collect for various reasons, including fraud.

In addition to tackling the VAT gap, the government aims to achieve significant cost savings for businesses by further promoting electronic invoicing, including faster payments to suppliers and service providers, lower printing and postage costs, more efficient processing of invoicing data, reduced archiving costs, and more.

What has changed compared to previous plans?

Initially, the plan was to phase in mandatory e-invoicing, starting with the largest companies based on their turnover. Then, the obligation would gradually expand to smaller businesses. However, it was ultimately decided that all VAT-registered entities will have to issue structured e-invoices for local B2B transactions from January 1, 2026, following the 'big bang' principle.

In the original plans, which had to be revised under pressure from the European Commission, there was also a provision for e-reporting. This meant that certain transactional data would be sent to the tax authorities. Although the proposal does not include this e-reporting component, preparatory texts indicate that the intention to introduce mandatory digital transactional reporting still exists.

The Belgian e-invoicing system

The B2B e-invoicing rules are based on the B2G e-invoicing rules that have been in force for government procurement since 2019 (Directive 2014/55/EU). This means that e-invoices must be prepared in the PEPPOL BIS format and sent via the PEPPOL network. However, deviations are allowed if both parties agree, but in such cases, the invoices must still comply with European standard norms, specifically the European standards for semantics (meaning and content) and syntax (structure and format) of e-invoices, namely EN 16931-1 and CEN/TS 16931-2.

When does the obligation apply?

The obligation to issue an e-invoice will only apply when the following three key criteria are met:

Criterion 1 – The status of the issuer:

First, the issuer of the e-invoice in Belgium must be both VAT registered and established for VAT purposes. This includes VAT-registered entities benefiting from the turnover exemption for small businesses (up to €25,000), agricultural enterprises subject to the special lump-sum scheme, and members of VAT groups.

In the case of VAT groups, members must issue e-invoices under their own individual sub-VAT numbers.

Importantly, foreign entities with a fixed establishment in Belgium for VAT purposes are also subject to mandatory e-invoicing.

The only categories of taxpayers not subject to mandatory e-invoicing are those subject to a different lump-sum scheme than the agricultural scheme, taxpayers declared bankrupt (only for activities for which they have been declared bankrupt), and taxpayers exclusively performing exempted transactions under Article 44 of the VAT Code. This applies regardless of whether these transactions would potentially grant them a right to VAT deduction.

Criterion 2 – The status of the recipient:

Second, the recipient must be obliged to accept e-invoicing. Taxpayers who must receive a structured e-invoice are those who must provide their VAT identification number for the invoiced transaction. This means that the location of establishment is not relevant, and foreign entities are also subject to the obligation to receive e-invoices.

The obligation also applies to taxpayers subject to special regimes, such as exempt small businesses and agricultural enterprises.

The only exception is for taxpayers engaged exclusively in transactions exempted under Article 44 of the VAT Code and, therefore, not entitled to VAT deduction.

Criterion 3 – Type of transaction:

The third criterion specifically concerns the category of taxable transactions. This criterion is limited in various explicit and implicit ways, and these limitations must be considered simultaneously.

As a result of the combination of restrictions imposed by the legislation, the transactions for which a structured e-invoice must be issued are primarily supplies of goods and services taking place in Belgium and not exempted under Article 44 of the VAT Code.

In principle, only "local" transactions fall under the obligation, and this does not apply to supplies where the goods are shipped or transported outside of Belgium. Exceptions are made for exports where the buyer must provide their Belgian VAT number.

Fall-back option

Taxpayers who do not have the necessary digital tools to receive structured e-invoices can use the HERMES platform for this purpose. The platform serves as a kind of "safety net" in case the recipient is not yet connected to the PEPPOL network, allowing the sender to still send their e-invoice.

HERMES converts a structured e-invoice into a PDF, complying with European standards for e-invoicing, and then sends this invoice to the recipient via email. HERMES also offers both recipients and senders the ability to track the delivery of these invoices.

VAT groups

The following specific rules apply to VAT groups:

• Each member of a VAT group is obliged to accept an e-invoice if its issuance is legally required. This also applies when a member of a (VAT-liable) VAT group only performs transactions exempted under Article 44 of the VAT Code. In that case, they must still accept the e-invoice.

• When transactions take place within a VAT group, i.e., between its members, a structured e-invoice (or a document that meets the same requirements) will also be required. This is the case if the same transaction outside the VAT group, for example, between a member and a non-member of the unit, would also require an e-invoice.

European approval is still a necessity

According to the VAT directive, the obligation for e-invoicing can only be introduced with the approval of the EU Commission (authorization by the Council on the proposal of the Commission). The application for this authorization was already submitted on October 5, 2023, and at present, discussions are ongoing between the Belgian administration and the services of the European Commission.

The proposal suggests that, given the authorizations granted to several other member states that have also introduced a mandatory e-invoicing requirement, Belgium is highly likely to receive this approval.

Supporting measures

In discussions with stakeholders, it has been repeatedly emphasized that supporting tax measures are essential. The government has responded by announcing changes to the investment deduction, which will come into effect on January 1, 2025. These changes include an increased investment deduction of 20% for digital investments in invoicing, customer relationship management, e-commerce, and cybersecurity. For small SMEs and self-employed individuals using subscription models, fiscal support is offered through an increased cost deduction of 120% for digital subscriptions that enable e-invoicing, as well as for advisory costs related to the new legislation. These benefits apply only to self-employed individuals and small businesses in the taxable periods 2024-2027, for costs specifically incurred to comply with the mandatory e-invoicing requirement.

Impact

It is clear that e-invoicing presents a significant opportunity for the tax authorities to more efficiently control taxpayers' transactions. For businesses still relying on traditional paper invoices or invoicing via email and PDF, the time has come to prepare for the transition to an e-invoicing system.

It is important to understand what this transformation means and how it will impact your business. Companies can use the mandatory e-invoicing requirement as an opportunity to gain more control over (or even optimize) their VAT situation.

For more information on the pending proposal or assistance with your e-invoicing journey, VAT Consult is available to help.