VAT – short for Value Added Tax – is giving quite a few entrepreneurs a headache. True, the VAT legislation is rather complex. We are therefore outlining the basic principles here.
What is VAT?
In Belgium, you pay VAT – Value Added Tax – on everything you buy or sell, whether products or services. This tax is calculated on the basis of the sales price.
Who is liable for VAT?
What is the general rule? Every Belgian company must pay VAT. But there are a number of exceptions.
Four types of taxpayers are distinguished:
The 'classic' taxpayers;
Activities that are exempt from VAT (e.g. essential professions in the social, cultural or medical sector);
Non-taxable persons (activities of the government);
Mixed statutes (such as a doctor practising aesthetic surgery. Because this type of transaction is subject to VAT, the doctor becomes what is called a 'mixed taxpayer').
Good to know: if your company's annual turnover is less than €25,000, you are liable for VAT but you can opt for the VAT exemption scheme (optional scheme), which allows you to be exempt from VAT obligations, mainly the filing of quarterly returns on Intervat. In return, you will not be able to charge VAT to your customers and will invoice inclusive of VAT. In addition, you will not be able to deduct VAT from the purchases you make. On invoices, you will have to state that you are a small business subject to the tax-free regime.
Read more about the various special schemes. If you have significant expenses and have an interest in deducting VAT, you can opt for the classic VAT system, even if your turnover does not exceed 25,000 Euros.
How much VAT do you pay?
The Belgian standard rate is 21%, but reduced rates apply to necessary products, such as 12% and 6%.
Basic commodities such as food, water, books, newspapers, cultural products and hotels benefit from the reduced rate of 6%, as well as renovation and/or repair work on private dwellings over 5 years old.
A small proportion of goods and services are affected by VAT at 12%. These are goods and services of high socio-economic importance and therefore benefit from a preferential tariff. Examples include coal, margarine and social housing, but this rate also applies to meals prepared in the hotel and catering industry. This 12% rate was introduced in the hotel and catering sector in 2010 to boost business. However, in return, the cash register was introduced. However, alcohol was maintained at 21%.
Warning: Since 2018, the VAT rate for food trucks has risen from 6% to 12%, in order to avoid unfair competition between horeca operators and food trucks.
As a self-employed professional, you keep track of how much VAT you charge on the products and services you sell, but also of how much VAT you pay on your own purchases. If you received more VAT than you’ve paid out, you transfer the difference to the tax authorities. But if you’ve paid more VAT than you received, you can claim the difference back.
What are your VAT obligations?
Since you are VAT liable, you have to perform the following tasks.
- filing a declaration about the start-up, modification or cessation of an activity
- keeping accounts of invoices and revenue (the obligations vary according to the VAT regimes)
- a periodic VAT statement (quarterly or monthly, depending on the case)
- a special VAT statement for taxable persons subject to certain special regimes that do not conform to the "classic" periodic declaration
- an annual listing of clients who are taxable persons
- a list of intra-community operations (with other EU countries)
You keep accounts
VAT accounting consists of three aspects:
- an incoming and outgoing invoice book
- a daily receipt book, in which you also record your sales without an invoice
- a table listing your assets: everything you buy in relation to your business. These would include a car, laptop, work or office supplies.
You issue correct invoices
You must mention compulsory details on every invoice you issue: from your company details to a sequential number. Your VAT number (which is the same as your company number), the VAT rates on all your services and products, the VAT invoice in absolute amounts and the total of all VAT amounts need to be clearly stated on your invoice.
You provide an annual list of VAT-paying customers
Annually, you submit a list of Belgian VAT liable companies that you have invoiced for more than 250 euros. For each customer you state:
- The total sales amount excluding VAT
- The total VAT amount
- The VAT number
You file your VAT return
Companies with an annual turnover in excess of 2.5 million euros file a VAT return every month. If your company’s sales are below that threshold, you need only file quarterly. This return is an overview of all the VAT you paid and received. You can submit this return online via Intervat before the 20th of the months of January, April, July and October.
Still looking for answers?
The VAT legislation is extremely complex and has numerous exceptions. When you invoice foreign customers, other complex rules apply. Do not hesitate to call on specialists (accountants or tax advisors). Their services will, of course, be invoiced to you but their trained professional eye will ensure that you do not fall foul of the regulations and do not pay the more than you need to.