Feb 28

Are your figures ready? New VAT obligations in Belgium for mixed and partial taxpayers from 2024

Since January 1, 2024, mixed taxpayers who use a general pro-rata (a turnover-based ratio) to determine their right to deduct VAT must register with the tax authorities using form 604A/B.

Previously, this obligation was only for those who applied the actual use method. The law on various provisions dated November 23, 2023 (published in the Official Gazette on December 1, 2023), stated that those who apply a general pro-rata must 'inform the tax authorities in advance' (art. 46, §1 of the VAT law). The Royal Decree of December 17, 2023 (published in the Official Gazette on December 22, 2023), further elaborated on this obligation, introducing the requirement for provisional and final pro-rata’s to be communicated digitally (via InterVAT). This decree also mandated that partial VAT taxpayers digitally report their VAT deduction positions to the tax authorities.

The purpose of these regulations is clear: the tax authorities aim to have all mixed VAT taxpayers registered on their radar for automated controls and risk analyses based on the structured data communicated (see, among others, Chamber 55 3569 and the Report to the King on the Royal Decree of December 17, 2023, Official Gazette December 22, 2023).

Obligations for actual use were already in place

Since January 1, 2023, a new procedure has been introduced for mixed VAT taxpayers regarding the VAT deduction based on actual use. Those wishing to apply this method must register 'in advance' (and electronically) using form 604A or B. This registration must be submitted 'before the end of the declaration period in which the start or change of their activity occurs' (art. 18bis § 1 paragraph 2 of Royal Decree no. 3, as recently amended). For VAT taxpayers who applied the actual use method before 2023, there was a transitional procedure, which ended on June 30.

In addition to registration, mixed taxpayers applying the actual use method must submit data regarding their applied deductions 'in a structured manner'. This information must be entered into InterVAT and is automatically processed by the tax authorities. This requirement was initially introduced in 2023 but was postponed to April 20, 2024 (according to Notice 19.01.2023 on the minfin website).

A taxpayer applying the actual use method categorizes their costs into activities that do not allow deduction, activities that allow 100% deduction, or mixed activities. For mixed activities, one or more keys must be used to determine the right to deduction. Sometimes a 'special' general pro-rata is used, and other times, specific keys are employed (for example, based on square meters, number of employees, etc.).

The tax authorities now require information on how much VAT is deducted or not according to each of these keys: 0%, 100%, and special ratios (article 18bis, §2 of Royal Decree no. 3). Article 18bis, §2, first paragraph, 1° of Royal Decree no. 3 indicates that the general pro-rata must be communicated 'as the case may be,' which suggests (although this is not entirely clear) that this requirement may only apply when a taxpayer switches from the system of a general ratio to actual use within the same year.
The obligation to communicate the VAT deducted or not per ratio requires due attention, because the relevant VAT amounts are not always booked separately (for example, in sectors where VAT is not reclaimed).

Now also an obligation for partial VAT taxpayers

The law on various provisions, dated November 23, 2023, granted the King the authority to specify the method by which partial VAT taxpayers are to communicate their special pro-rata calculations. Consequently, it was anticipated that these taxpayers would be subjected to obligations similar to those imposed on mixed VAT taxpayers applying the actual use method.

The Royal Decree of December 17, 2023 (published in the Official Gazette on December 22, 2023), enacted this requirement, which took effect on January 1, 2024. Therefore, partial VAT taxpayers had a limited window to prepare for compliance. By April 20, 2024, they are required to submit their financial figures.

Structured communication of general pro-rata’s
So, new obligations have also been introduced for mixed VAT taxpayers who apply a general pro-rata. They too must register in advance (art. 46, §1, first paragraph VAT law and art. 14 Royal Decree no. 3). Additionally, the concerned taxpayer must annually communicate his provisional and final pro-rata by April 20 (art. 15 Royal Decree no. 3).

What is remarkable is that all the aforementioned obligations start on January 1, 2024. Taxpayers who already applied a general ratio on December 31, 2023, must register by July 1, 2024 (Art. 14, §1, third paragraph, 2° Royal Decree no. 3). The communication of the ratios must then be done in the VAT declaration of the first quarter (quarterly filers) or in one of the first three calendar months (monthly filers) of the year. That is, by April 20, 2024.

Contrary to what one might expect, mixed taxpayers must first communicate their pro-rata in a structured manner and then register (if at least taking into account the ultimate submission deadline).

In principle, such data should also currently be included in the declaration in a calculation sheet. This calculation sheet must still be prepared but no longer sent (art. 15, last paragraph Royal Decree no. 3).

Several questions remain unanswered

With the deadline of April 20 fast approaching, it's all hands on deck for those required to report. Allocating VAT to exempt or non-VAT activities demands creativity and/or significant effort. Furthermore, a clear stance needs to be established on determining the deduction position, such as for partial VAT taxpayers. The full impact and importance of these questions will only unfold in the coming months and years, as the tax authorities compile all the data and start to outline their positions.