Context
The right to deduct VAT expires if not exercised within the legally established limitation period. In Belgium, this is governed by Article 4, second paragraph, of Royal Decree No. 3, which provides that the right to deduct expires three years after the end of the calendar year in which the VAT became chargeable.
The Volkswagen AG (C-533/16) and Biosafe (C-8/17) rulings shed new light on these limitation periods. Until those judgments, the rule “late is late” was applied almost absolutely: once the period had passed, the deduction right lapsed automatically, regardless of circumstances. However, the Court introduced an important nuance: if a taxable person was prevented by circumstances beyond their control from exercising the deduction right in time, then the limitation period must not render the right impossible to exercise.
Biosafe is especially relevant. The company applied a reduced VAT rate to a customer, but was subsequently assessed by the Portuguese authorities because the normal rate applied. A dispute then arose with the customer, who refused to pay the additional VAT, claiming the deduction right had expired (Portugal had a 4-year limit).
Because the VAT was deemed chargeable at the time of the original transactions (and not when the additional VAT became due), the customer could not exercise their deduction right.
The Court ruled that in such situations, Member States must allow the taxable person to claim the deduction after the fact.
Seven years later, the Belgian authorities published circular 2025/C/23, converting the Biosafe judgment into policy.
The circular outlines the conditions under which taxpayers may still exercise VAT deduction when a corrective document is received after the original limitation period. But the approach is far from flexible: while the principle is acknowledged, it is implemented in a very rigid manner.
The circular outlines the conditions under which taxpayers may still exercise VAT deduction when a corrective document is received after the original limitation period. But the approach is far from flexible: while the principle is acknowledged, it is implemented in a very rigid manner.
When is Biosafe applicable?
The circular sets out six cumulative conditions under which a taxable person may still claim VAT deduction outside the regular limitation period:
- The VAT must be owed by the supplier, who issues a corrective document.
- The supplier must issue a document charging additional VAT due to a previous mistake (e.g. incorrect rate or wrongful exemption).
- All material and formal requirements for deduction (e.g. possessing the corrective document) must only be fulfilled after the expiry of the original limitation period.
- The taxable person must not have been able to exercise the right earlier. If they remained passive while knowing (or should have known) VAT was due, they may be deemed negligent. Any form of negligence may cause the right to lapse.
- There must be no fraud, collusion, or abuse of rights between supplier and customer.
- The supplier must have actually paid the additional VAT to the authorities.
The circular also clarifies that only the additional VAT amount may be deducted beyond the limitation period. The originally charged VAT remains subject to the standard limitation and, if expired, the right is definitively lost.
The circular also introduces a very limited tolerance for corrective documents received just before the expiration of the original limitation period. The taxable person can preserve the deduction right by informing the tax authorities in writing in advance and subsequently including the deduction immediately in the VAT return (by 20 or 25 January of the following calendar year). Failure to do so forfeits the ability to rely on the Biosafe judgment later, as the deduction would no longer have been objectively impossible.
How must the deduction be applied in practice?
If a taxpayer invokes the Biosafe exception to deduct VAT after the expiry of the original limitation period, the circular imposes strict formalities. The additional taxable amount and corresponding VAT must be reported in the appropriate boxes of the VAT return (boxes 81–83 and/or 62). Moreover, the taxpayer must explicitly and in writing inform the authorities in advance that they are using this regime.
This must be done via the comment field in the electronic filing or an attached document in case of a paper return, stating:
• the deductible VAT amount;
• the number of the corrective document (or combination of credit note and new invoice);
• a clear reference to circular 2025/C/23.