VAT: Draft law introduces joint liability for electronic interfaces and other changes as from 01/01/2024

Joint liability for electronic interfaces, formalities linked to the general pro rata and other VAT changes enter into force as from 01/01/2024 (draft law)

A new draft law on various provisions regarding VAT introduces some substantive changes for mixed taxable persons, electronic interfaces, companies in the real estate sector and also introduces some technical changes.

The draft law is currently processed in the Chamber of Representatives and would mainly enter into force as from 01/01/2024.
 

VAT deduction method: new formalities for the general pro-rata method method (01/01/2024)

Since January 1st, 2023 mixed taxable persons are required to submit an electronic notification in order to opt for the deduction of VAT according to the real use method.

• Existing mixed taxable person that were already applying the real use method on December 31st, 2022 had to notify by June 30th, 2023.
• Other existing mixed taxable persons can only shift to the real use method as from the 1st of January of the year, and should notify before the 31st of January of that year (monthly filers) or the 31st of March of that year (quarterly filers).
• New mixed taxable persons should notify before the end of the first reporting period following the reporting period in which they became a mixed taxable person.

Those mixed taxable persons are also required to provide certain information on how to exercise the right to deduct VAT, which should be filed electronically via the INTERVAT application at the latest together with the VAT return that is due by April 20th of each year.

The purpose of this change is to simplify the procedure to opt for such deduction method while at the same time allowing the tax administration to better monitor the correct application of the real use method by taxpayers. This change has already been enacted and is in force.

In order to extend such monitoring to other mixed taxable persons, applying the general pro-rata method, the new draft bill contains amendments to the VAT code introducing similar obligations for such taxpayers. Although no details are provided at this stage, it would appear that taxpayers using the general pro-rata will need to:

• Submit electronic notification through the e-604A or e-604B forms (for taxable persons that are already applying the general pro-rata method on 31 December 2023, the notification via the e-604B form must be completed and submitted before 1 July 2024, for the taxable persons starting to apply the general pro-rata method the deadline still has to be determined in the Royal Decree);
• Communicate each year to the tax administration their provisional and definitive general pro-rata (and supporting calculations thereof) electronically via the INTERVAT application, together with the submission of their VAT returns for the first quarter of the year (quarterly filers) or one of the first three months of the year (monthly filers).

Finally, the draft bill introduces an obligation for partial taxable persons (taxable persons with activities outside the scope of VAT) , which will in fact apply the same real use deduction method as mixed taxable persons. Partial taxable persons will also be obliged to yearly communicate to the tax administration the special pro-rata they use, to be filed at the latest together with the VAT return that is due by April 20th of each year.

These new obligations for mixed and partial taxable persons would enter into force as from January 1st, 2024.
 

Joint liability for electronic interfaces (01/01/2024)

As part of the new VAT rules for e-commerce, that entered into force as from July 1st, 2021, a deemed supplier provision was introduced for electronic interfaces.

For electronic interfaces that facilitate certain e-commerce sales, without being a contract party in the supplies of goods, this fiction introduced some additional obligations with respect to certain supplies of goods. The electronic interface is then deemed to purchase the goods from the underlying supplier and to sell those same goods to the final consumer, while in reality there is a direct supply from the underlying supplier to the final consumer.

Although this measure was introduced on an EU level to ensure efficient and effective collection of VAT, the scope does not include all local and distance sales (via electronic interfaces) to taxable and non-taxable persons whose intra-Community acquisitions are not subject to VAT (eg: small enterprise regime, farmer regime, private persons,…).

Since VAT collection issues arise with respect to all of these sales, it is proposed to introduce a joint liability rule for electronic interfaces with respect to those sales taking place in Belgium that are not yet covered by the deemed supplier fiction.

The electronic interface will be released from this joint liability when it proves that it is acting in good faith and that it was not at fault or negligent. The interface is not at fault or negligent in case it asked the underlying supplier if he has the required VAT registration in order to perform the transaction.

The new joint liability rule for electronic interfaces will normally apply for the VAT that becomes due as from January 1st, 2024.
 

Statute of limitations in case of lawsuit

The statutes of limitation of 3 years can be extended to 7 years when the VAT authorities receive certain information that proves that taxable transactions were not declared, transactions were incorrectly exempted or incorrect VAT deductions were applied.

One of the sources included in article 81bis, §1 of the Belgian VAT code, can be a lawsuit. An example could be a lawsuit, where party A is found guilty of forgery because he issued false invoices to party B. Because this may have enabled party B to unlawfully deduct VAT, the Belgian VAT authorities can use this information to open a VAT audit against B. The statute of limitation of that audit is extended to 7 years in that case.

However, due to the duration of the judicial procedure in question, it can happen that information is only brought to the attention of the VAT authorities after the end of the statute of limitations.

Therefore, the draft law foresees that the statute of limitations end at the earliest after the expiry of the calendar year following the decision of the court which has force of res judicata. As it concerns procedural legislation, the rule will be applicable as of the moment of entry into force of the law (10 days after publication in the Belgian Gazette).
 

Obligations for payment service providers – modification to the legislation (01/01/2024)

As of 1 January 2024, payment service providers will be obliged to submit certain information based on Directive (EU) 2020/284. At first, the aim was to apply a strict transposition of the Directive into Belgian law. This includes that the data provided by payment service providers should only be stored for a period not longer than 10 days by the Belgian VAT authorities. After that period, they are then transferred to the EU CESOP database.

However, in order to ensure compliance with these obligations and to fight VAT fraud, the Belgian VAT authorities would need to have access to those data for a longer period. Therefore, the draft law includes that the Belgian VAT authorities will have access to a national database (besides the CESOP database on EU level) which will include the information provided by the payment providers that is stored until 31 December of the fifth year following the year in which the information has been included in the national electronic database.
 

Reduced VAT rate for immovable works to buildings for persons in need: day-care centers included (01/01/2024)

Certain institutions can enjoy the 6% or 12% reduced VAT rate on the purchase, building or renovation of buildings for persons in need. However, in principle it was only focusing on those institutions where overnight accommodation is possible. As this is no longer in line with the EU VAT Directive, day care institutions who perform similar activities which meet the conditions, can now also benefit the application of the reduced VAT rate.

The broader scope can be applied for ongoing projects for transactions where the VAT became due after January 1st, 2024.
 

Other technical changes to the VAT legislation

Please note that the draft law also included other technical changes to the VAT legislation. Those mainly concern changes in wording, references, structure which do not form major changes to the VAT rules as such.