For the December VAT return, it might be good to consider a few VAT topics. In addition to the usual transactions in the last return period, certain adjustments or corrections may be required in this final VAT return.
Below we discuss some typical VAT topics that deserve special attention at year-end.
We start with some good news. As of 2021, the December advance has been permanently abolished. Hence, there is no longer a need to settle any advance payments.
Year-end TP adjustments
VAT and transfer pricing ("TP") are often (wrongly) not associated with each other.
VAT is intended to tax consumption through indirect taxation based on the consideration received, while transfer pricing falls within the scope of direct taxation, by setting the appropriate price for transactions between related parties.
Although VAT and TP have different objectives, a TP adjustment can have VAT (or even customs) implications. Whether a TP adjustment impacts the VAT position depends on the type of TP adjustment. In any case, we recommend that the possible VAT consequences of year-end adjustments be properly identified.
Statute of limitations
In a recent ruling, the Court of Cassation (ruling of June 17, 2022, F.20.0038.F) rejected the tax authorities' highly controversial position on VAT credits sitting in the current account. From now on, it is clear that the statute of limitation for carry-forward credits only starts running once the taxpayer has requested a reimbursement via his VAT return.
Recovery of VAT on bad debts is, of course, also subject to a limitation period. VAT on claims that are deemed to be lost in 2019 must be recovered no later than in 2022 (via the December declaration at the latest). For bad debts, except in the case of bankruptcy, in order to be in the position to recover VAT, a corrective document must also be issued. Our experience is that in practice this is sometimes forgotten.
December and January are traditionally the months when you are invited to a reception or party in your office. These expenses are often targeted during a VAT audit. However, what VAT deduction rules apply to these expenses?
Where, in the sole interest of all employees, a company provides certain social benefits of collective nature, which are not regarded as benefits in kind and provided they are considered as deductible for the purposes of Income Taxes, the VAT levied on these expenses qualifies for VAT deduction.
However, this does not apply to catering expenses for which an explicit limitation of deduction applies (article 45, §3 of the Belgian VAT Code). In response to a Parliamentary Question (no. 3-239 from Mr Caluwé), the Minister of Finance confirmed that if a company purchases food and drinks in the context of an office party and the food and drinks are not served by the staff of the catering company, the VAT on these expenses remains deductible.
If you are organizing a year-end party and are buying food and drinks yourself and only have the caterer arrange for the service, then in principle the VAT on your caterer's invoice qualifies for VAT deduction.
Finally, are you planning to give your staff or business relations a gift?
If the value of your gift is less than €50 excluding VAT per employee/business relation and per year, you can deduct 100% of the VAT. However, a gift of €50 (excluding VAT) is just too much and therefore no longer eligible for VAT deduction. The VAT on tobacco and spirits is also not deductible under any circumstances (art. 45, §3, 2° of the Belgian VAT Code).