On 12 August 2024, the Belgian VAT Authorities published a new set of 26 FAQs (Dutch | French) providing further clarification on the new formalities for taxpayers applying the pro-rata or direct attribution method for their partial VAT deduction.
It clarifies that taxpayers who only engage in ‘incidental’ or ‘occasional’ financial or immovable activities are not subject to the requirement to submit a prior notification of their deduction method, even if the deduction of input VAT directly linked to those transactions may be blocked. The FAQ provides more background on when a financial transaction or the rental of an appartement can be considered as ‘incidental’ or would qualify as a specific economy activity instead. It is noted that the receipt of interest from financial investments, regardless of the investment form, does not constitute a specific economic activity. However, the administration’s guidance on the rental of an apartment is less definitive (“The extent to which the real estate transactions belong to a specific economic activity of that nature depends on the case”).
The FAQ also discusses the possibility for taxpayers to obtain official approval or validation of their VAT deduction method. The position taken is that the VAT Authorities will no longer grant individual agreements about the application of the direct attribution method.
From the VAT Authorities’ perspective, they intend to limit themselves to the procedure foreseen in the VAT legislation under which they have the possibility, within a 2-year timeframe, to deny the application of the direct attribution method applied by the taxpayer under certain circumstances. Next to that, challenges to a direct attribution method applied by a taxpayer can also be made within the standard prescription periods in the framework of a regular VAT audit.
Taxpayers can still seek legal certainty on their VAT deduction method through an advance ruling from the ruling commission. However, this process cannot validate specific percentages or numerical calculations. This procedure requires careful planning as the ruling commission can only issue decisions before the tax rules come into effect for the taxpayer and obtaining a prior decision typically takes 3 to 6 months.
The new rules will ‘force’ partially exempt taxpayers to monitor their activities more closely and take more proactive steps before applying or changing their VAT deduction method.
Key contacts
Joaquim Heirman
Joaquim is a Director at Deloitte Legal, specialising in all VAT matters. He has over 10 years of experience in advisory services including guiding companies through administrative and court procedures. The majority of his clients are privately held companies and include real estate developers, law firms, health care suppliers and governmental institutions. Since 2009 he is a member of the Brussels bar. He published regularly on VAT matters and lectures at the KULeuven (University Leuven) on VAT aspects of real estate and is research assistant at the UGent (University of Ghent).
