Belgian Parliament approves expansion of VAT exemption scheme for small enterprises: What Changes?

Mar 18
Starting from January 1, 2025, the VAT exemption scheme for small businesses will be applicable "cross border". This is the result of a European directive (EU Directive no. 2020/285 of February 18, 2020), the transposition of which was approved by the Chamber last week.

With this expansion, a dual turnover threshold is introduced. Firstly, the "Belgian" turnover threshold of 25,000 EUR still applies (equivalent to the current annual threshold for the exemption scheme). Secondly, the total annual turnover within the EU may not exceed 100,000 EUR (EU turnover threshold).

As a result, Belgian businesses will be able to apply the small business scheme in other EU countries, taking into account both the national thresholds and the EU turnover thresholds. Conversely, foreign (EU) businesses will be able to sell in Belgium under the small business exemption (if they meet the conditions).

New formal obligations will be introduced to ensure compliance with the applicable thresholds.
Belgian exemption scheme

Businesses with an annual turnover of up to 25.000 EUR can opt for the special exemption scheme. Businesses applying this exemption scheme do not have to charge Belgian VAT on their outgoing invoices and do not have to submit periodic VAT returns. However, they must submit an annual customer list when they perform transactions with Belgian VAT registered purchasers. Small businesses cannot recover VAT on their costs.

Certain businesses and sectors are excluded from the exemption. This includes, for example, VAT groups, contractors, businesses active in the hospitality sector, those trading in waste, and activities related to the rental of furnished accommodation.

This scheme is optional and has a European legal basis. For the application of this exemption scheme, the Directive now stipulates that the national threshold may not be higher than 85.000 EUR. During discussions of the committee, the question was raised whether the threshold could be increased, for example through indexation. However, due to budgetary constraints, the threshold of 25,000 EUR is maintained in Belgium.

Extension of the scheme to foreign businesses

Foreign businesses are currently excluded from this scheme, which led to discrepancies. This limitation, which had a negative impact on competition within the internal market, is now addressed by opening up the scheme to businesses established in other EU countries.

The exemption scheme is thereby expanded on two fronts. From now on, foreign businesses can also enjoy this scheme in Belgium, while Belgian taxpayers can opt for this exemption in other EU countries. To this end, small businesses must take into account two turnover thresholds: a general threshold for the entire EU and a specific national threshold, depending on the member state in which VAT is due.

Dual turnover threshold

The dual turnover threshold is intended to ensure that only small businesses can apply the exemption in a member state where they are not established. This prevents competitive distortions and should ensure a fairer playing field.
This dual turnover threshold only applies to foreign businesses that want to use the exemption in Belgium, or to Belgian businesses that wish to apply the exemption scheme abroad.

For Belgian businesses wishing to use the exemption within Belgium, only the Belgian turnover threshold needs to be considered.

Prior notification

When a Belgian business wants to apply the exemption scheme in another EU country, it is necessary to make a prior notification via a specially designated electronic address. This prior notification serves as a condition for application. In such a case, the business receives a VAT number with an "EX" suffix (e.g., BE0123.456.789EX).

A foreign business that wants to use the exemption scheme in Belgium must also first notify its own EU member state. Subsequently, it is assigned a VAT number with an 'EX' suffix, as described in Article 284, paragraph 3 of the VAT Directive. If the business meets all the set conditions, it is not necessary to apply for a Belgian VAT number and no periodic VAT returns need to be submitted in Belgium.

Compliance (new) formalities

To apply the scheme in other EU countries, Belgian businesses active in other EU countries must report their Belgian turnover and EU turnover per calendar quarter. This also includes reporting "nil" turnover if no turnover was generated in the relevant quarter. This reporting must be submitted by the end of the month following each quarter. The details of this procedure will be laid down in a Royal Decree. If the EU turnover threshold is exceeded, the Belgian business must report this to the Administration within 15 days, stating the turnover amount achieved up to that point.

Foreign businesses must comply with similar formalities in their country of establishment, which acts as a so-called "single point of contact". These formalities are deemed essential to keep track of in which member states the small business applies the exemption scheme and to what extent the conditions regarding the turnover thresholds are met.

Effective date

The scheme will come into effect on January 1, 2025.