New VAT circular letter clarifies amendments made by royal decrees

Full article in Dutch and French

On 21 June 2023, the Belgian tax authorities published Circular Letter 2023/C/63 (Dutch | French) concerning a number of amendments to certain VAT provisions by various royal decrees. The circular letter includes comments on changes to the reverse charge system for building works for taxable persons obliged to submit a periodic VAT return, the special flat rate scheme for small café owners, the right to deduct VAT according to the actual use of all or part of goods and services, the removal of food from a business with a view to its provision for charitable purposes, and various technical amendments.

This alert addresses the clarifications provided in the circular letter regarding the amended notification procedure applicable to the exercise of the right to deduct VAT according to the principle of “actual use.”

Background

As from 1 January 2023, the procedure for the application of the actual use method has changed. The circular letter provides clarification on the need to replace the “prior approval” procedure with a digital “prior notification” procedure.

Mixed VAT payers who already applied the actual use method on or before 31 December 2022 must also submit the digital e-notification (no later than 30 June 2023). This is partly because some decisions that date from a period before the digitalisation of FPS Finance are no longer available.

Clarifications

The following clarifications are provided: 

• Taxpayers not required to submit a notification: In principle, “partial” VAT payers who make some supplies that are outside the scope of VAT are not required to notify. However, if they carry out VAT-exempt and taxable transactions within their economic activity, they may be eligible. VAT payers who apply a general ratio, but additionally have deduction restrictions due to the ratio imposed by regulation, are also not affected.
• The date of the notification and its effective date: The effective date is generally 1 January of the calendar year in which the notification is made. In some cases, the effective date may be the first day of the reporting period following the date of commencement or change of activity. The practical aspects of such a change during a calendar year are not discussed.
• Duration of the notification: The notification is of indefinite duration, but runs at least until 31 December of the third year following the effective date of that notification.
• Communication of data regarding actual use: The circular letter does not contain any new information regarding the nature of the data to be transmitted from 2024 onwards. Neither the Royal Decree nor the example in the circular letter deal with the exact method of calculating the divisional percentage of the VAT categories (i.e., over what period must the percentage be calculated?).  
• Sanctions in the event of noncompliance with the procedure: In cases of noncompliance, no deduction according to the actual use method would be permitted before 1 January of the next calendar year.
• Cessation of actual use method: Further information on the notification required is provided.
• Refusal by the tax authorities to permit the actual use method: The refusal decision must be communicated to the person liable for VAT at the latest by 31 December of the year following the year in which the initial notification is drawn up.
• Notification by the tax authorities requiring the application of the actual use method: The effective date of this requirement is the first day of the declaration period of the notification. 

Conclusion

The circular letter contains several clarifications regarding the notification requirements for the application of the actual use method, and also provides practical examples. Although the circular letter does not discuss the exact calculation method of the data to be communicated in 2024, affected taxpayers may wish to start preparations as soon as possible.