Like any other organisation, non-profit organisations (NPOs) may engage in economic activities (sale of goods, provision of services, etc.). In this case, Value Added Tax (VAT) may apply.
General principles of VAT
VAT is an indirect tax on the consumption of goods and services. In Belgium, VAT is paid by the end customer, but is collected and transferred to the State by companies selling goods or providing services. There are several VAT rates in Belgium:
- 21%: standard rate.
- 12%: intermediate rate (for certain goods such as restaurant services).
- 6%: reduced rate (for essential goods and services such as food and medicines).
NPOs are not automatically subject to VAT. Whether or not they need to pay VAT depends on the nature of their activities. In other words, only NPOs carrying out economic activities on a regular basis can be subject to VAT.
Criteria for VAT liability of NPOs
An economic activity is defined as any activity consisting in offering goods or services in return for payment, on a regular basis. NPOs carrying out such activities may be subject to VAT, even if their aim is not to make a profit. Examples of economic activities of an NPO:
- Sale of products (e.g. books, crafts, food) as part of regular events or the organisation's shop.
- Organisation of paid courses, workshops or training.
- Provision of goods or services (renting rooms, equipment, etc.).
An NPO becomes subject to VAT when its activities are conducted regularly and continuously in exchange for payment. Ad hoc activities, such as organising an annual charity event or holding a fundraising meal, do not automatically make an NPO liable for VAT. As long as these activities are exceptions, organised on a one-off basis, and do not provide a regular source of income for the NPO, they are not subject to VAT.
VAT threshold
NPOs whose annual turnover from economic activities subject to VAT does not exceed €25,000 are eligible for an exemption and may choose not to be subject to VAT. This means that:
- They do not have to charge VAT on their sales.
- They do not have to submit a VAT return.
- They cannot reclaim the VAT paid on their purchases (this is the main disadvantage of this option).
This system is particularly advantageous for small NPOs with limited economic activities.
VAT exemptions for NPOs
Some activities of NPOs may, by their nature, be exempt from VAT. Belgian legislation includes exemptions for certain sectors to support non-profit organisations that serve the public interest. These exemptions are outlined in Article 44 of the VAT Code.
NPOs offering teaching or training services may be exempt from VAT. This exemption applies to educational activities such as:
- School or extracurricular classes.
- Professional training.
- Educational workshops, including those for children and adults in a non-profit setting.
NPOs providing social or medical services are also eligible for VAT exemption. This includes:
- Home help services for the elderly, sick or disabled.
- Non-profit medical services (e.g. health care, hospital services).
- Reception centres for people in difficulty (refugees, homeless, etc.).
Sporting and cultural activities organised by NPOs may be exempt from VAT. These exemptions are generally granted for activities of general interest, such as:
- The organisation of sporting events (competitions, courses, recreational sports activities).
- Cultural events (exhibitions, shows, concerts, art workshops).
However, these activities must be organised on a not-for-profit basis for the exemption to apply.
Non-profit organisations that provide services in partnership with public authorities or government bodies may also qualify for VAT exemption. This applies to local or regional public services, such as:
- The management of community infrastructure.
- Community services, including the management of libraries, crèches, socio-cultural activities, and more.
Obligations of NPOs subject to VAT
When a non-profit organisation (NPO) is subject to VAT, it must meet the same legal and administrative obligations as a conventional business. This includes maintaining accurate accounts and submitting regular VAT returns to the tax authorities.
- Any NPO subject to VAT must register with the tax authorities and obtain a VAT number. This number must appear on all official documents, including invoices.
- An NPO liable for VAT must issue invoices for all sales of goods or services. These invoices must state the applicable VAT rate, the total VAT amount charged, and the NPO’s VAT number, and must comply with Belgian invoicing regulations.
- NPOs subject to VAT are required to complete and submit periodic VAT returns — usually on a monthly or quarterly basis.
- They must pay the VAT collected on their sales to the State, after deducting the VAT paid on their purchases. If the deductible VAT exceeds the VAT collected, the NPO may claim a refund.
Mixed NPOs: activities subject to and exempt from VAT
NPOs can carry out both activities that are exempt from VAT and activities that are subject to VAT. In this case, they are considered to be mixed NPOs. This involves specific accounting and administrative obligations.
In a mixed NPO, the deductible VAT on purchases corresponds to the proportion of activities subject to VAT. For example, if 70% of the NPO's turnover comes from activities subject to VAT, it can deduct 70% of the VAT paid on its purchases.
VAT exemption scheme for small NPOs
Small non-profit organisations (NPOs) with an annual turnover from VAT-taxable economic activities not exceeding €25,000 are eligible for the VAT exemption scheme. This simplified system reduces the tax burden for smaller NPOs. Under this scheme, the NPO is not required to submit periodic VAT returns or pay VAT to the State, significantly reducing administrative obligations.
However, the main drawback of the exemption is that the NPO cannot recover the VAT paid on its purchases. This may be a disadvantage if the organisation incurs substantial costs in delivering its activities.
Intra-community VAT for NPOs
Belgian NPOs purchasing or selling goods or services within the European Union are subject to specific intra-Community VAT rules. These rules aim to avoid double taxation while ensuring that VAT is collected in the country of consumption.
Intra-community purchases
If a non-profit organisation (NPO) purchases goods or services from another EU country, it must declare and pay Belgian VAT under the reverse charge mechanism. The NPO is responsible for reporting these cross-border purchases and paying the applicable Belgian VAT on the goods or services received.
Intra-community sales
Sales of goods or services to customers in other EU countries may be exempt from Belgian VAT if the customer itself subject to VAT in its own country. However, these transactions must be declared via intra-community declarations.