Belgium

VAT rate consolidation delay Belgium’s e-invoicing and e-reporting plans formed part of wider tax reforms in the country, which included a potential VAT rate consolidation.   Belgium’s planned wider tax reforms have, as of late collapsed, in part due to a degree of political instability in the country. This means that the envisaged plans to consolidate the reduced and super-reduced rates into a single 9% VAT rate have, for now, also halted.   This in turn raises further questions about the timeline around Belgium’s B2B e-invoicing and e-reporting mandate. While the Belgian government has not communicated any official timelines, this potentially also places the July 2024 inception date in some doubt.  Belgian is a critical and compliant market for Kofax. We are closely following the mandate implementation, with a view to categorically confirming when we can expect e-invoicing and e-reporting to commence in the country.    

Access to documents and applications with the APIs of the FOD Finance The Belgian Federal Government (FOD Finance) wants to facilitate data exchange between taxpayers and the FOD Finance via the use of Application Programming Interfaces (APIs). API connections hold obvious advantages: they reduce the frequency of logins, clicks and actions when navigating file management. Specifically, with reference to the FOD Finance, the benefits extend to: 

• Consulting documents from the FOD Finance directly from an accountancy software package  
• Submitting periodic VAT returns.  

For enablement, software package developers must link the FOD Finance APIs to their own software packages.  Further information on the APIs can be located via the following website:  https://financien.belgium.be/nl/E-services/apis-fod-financien  

Electronic invoicing in public procurement – changes In accordance with the initial schedule, mandatory B2G obligations in Belgium were intended to pre-date the upcoming B2B obligations. However, delays to the B2G implementation schedule means B2G obligations may ‘collide’ or at least come relatively close to B2B obligations in the country.   Draft legislation suggests that the obligation for economic operators to send their invoices electronically for public contracts with an estimated value of less than EUR 30.000 will only now be effective from 1 March 2024.   This obligation to send invoices electronically in the context of public contracts does not apply to public contracts whose estimated value is less than or equal to EUR 3.000. However, contractual clauses can make this a more definitive requirement.   Additionally, from 1 March 2024, the federal contracting authorities will also impose electronic invoicing below EUR 3.000.  The Belgium Council of State will now consider the draft.  The official publication is available on the following website and provides further information:   https://news.belgium.be/nl/wijzigingen-inzake-de-borgtocht-en-de-elektronische-facturering-van-overheidsopdrachten  You can also read more about Belgium’s B2B e-invoicing and e-reporting mandate via our dedicated country-specific page here. 

The acceleration of the B2B e-invoicing and e-reporting mandate in Belgian is not surprising: as discovered in a recent study performed by the International Monetary Fund (IMF), the Belgian tax authorities fail to collect approximately one fifth of the VAT due on products and services. The figures published represent a slight improvement from the pandemic period, but remain high, especially when compared with neighboring countries.   The study will dictate the trajectory to further reduce the VAT gap in Belgium. Other initiatives, aside from the mandate, include the modernisation of the VAT gap and cash registers.     The IMF report can be accessed via the following link:   https://www.imf.org/en/Publications/CR/Issues/2023/05/17/Belgium-Technical-Assistance-Report-Revenue-Administration-Gap-Analysis-ProgramThe-Value-533507?cid=em-COM-123-46566    Belgium is a compliant territory for Kofax and we intend to support the upcoming e-invoicing and e-reporting mandate. You can read further information about this here.    

Response to Parliamentary question on the status of the EU Derogation request to implement mandatory e-invoicing Last month’s post revealed some significant updates in respect of Belgium’s B2B proposed e-invoicing trajectory. The Belgian Minister of Finance has re-affirmed in response to a Parliamentary question that in accordance with the government agreement, he intends to mandate e-invoicing for most taxpayers.   This inevitably requires an application for derogation from Articles 218 and 232 of the EU VAT Directive, which has been discussed between the Cabinet of the Ministry of Finance and the European Commission.   The measures regarding both e-invoicing and e-reporting are in line with the proposal from the European Commission and are hoped to further reduce the VAT gap in the country. 

VAT reduction for energy Belgium’s fiscal trajectory for 2023 and 2024 is shaping up to be a busy one.  Our recent post on the VAT reduction for energy in Belgium indicated that the reduced rate of 6% for energy (down from 21%) was a temporary one. However, the Belgian Federal Budget has reversed this, stating that this VAT reduction will in fact be a permanent one, benefitting Belgians with more affordable energy prices. The VAT rate will be effective from 1 April 2023.  Belgium is a compliant territory for Tungsten and we support all valid VAT rates in the country as part of our e-invoicing solution.  

Overhaul of VAT process Last month, we published some significant updates in relation to Belgium’s intent to mandate B2B e-invoicing in the country. You can read more in respect of the same here.   Belgium’s outreach in respect of the digitisation of its fiscal procedures has extended yet further beyond the e-invoicing topography as it looks to simplify and streamline its fiscal infrastructure on a much more extensive scale. The proposed Bill No. 55K3128001 includes the procedures which, once facilitated, aim to achieve this underlying objective.  A particularly significant change proposed by the bill is the introduction of automated processing of periodic VAT declarations and payments.  The Bill is currently with the Belgian Parliament for approval, and is expected to come into effect, if approved, on 1 January 2024. This aligns with proposed e-invoicing and e-reporting transitions in Belgium, hinting at prevalent fiscal change in the country in 2024. 

Wider tax reforms including proposed B2B e-invoicing and e-reporting Persistent rumours ran abated in the e-invoicing realm relating to Belgium’s intention to accelerate e-invoicing in the country. We have now been provided with more concrete details about Belgium’s intention to mandate e-invoicing in the country.   The Belgian Minister of Finance has unveiled more definitive timeframes with regards to anticipated e-invoicing in Belgium.    The proposed plans point to a hybrid solution including e-invoicing and e-reporting specifically- the latter only just making an appearance in Belgium’s proposed tax reforms. This is likely influenced to a considerable extent by the VAT in the Digital Age (ViDA) proposal, which sets out mandatory cross-border reporting from January 2028 for all EU Member States. You can read more about the proposal here.    E-invoicing implementation in Belgium is likely to be phased, in line with the following:   

• 1 January 2024: all large companies are obligated to receive structured invoices   
• 1 July 2024: e-invoicing will be mandated for taxpayers with an annual turnover of over 9,000,000 Euros   
• 1 January 2025: taxpayers with an annual turnover of between 700,000 and 9,000,000 Euros will be subject to the new e-invoicing obligations  
• Other taxpayers will comply at a later unknown date.   

The proposed e-invoicing and e-reporting solution comes as part of wider proposed tax reforms in Belgium, which is also recommending the following VAT rate changes:  

• A new 9% rate  
• The broadened application of the 0% VAT rate  

• This would include ‘essential’ items such as fruits, vegetables, medication, diapers, specific hygiene products, and public transportation  

• The abolishment of the 12% rate  

• The existing reduced rates of 6% and 12% would be combined into a new reduced rate of 9%. Coal, considered a major pollutant, would be subject to the standard rate of 21%  

• The reduction in scope of the reduced 6% VAT rate  

• The reduced rate of 6% would remain for certain basic utilities like electricity, natural gas, heating, and tap water  

• More specifically: the VAT rates for demolition and reconstruction specifically are proposed to permanently be set at the new 9% rate, rather than 6%.  

Through suggesting revised VAT rates, Belgium is following in the footsteps of its European counterparts, Switzerland, The Czech Republic and Norway, who are similarly either implementing or contemplating an overhaul of their VAT rates.    While these changes are substantial, it is important to note that the proposals, including timeframes, are yet in draft form only. Furthermore, the timeframes outlined relate to the e-invoicing element only of the proposal; e-reporting timeframes are yet to be defined.    Belgium is a compliant territory for Tungsten Network, and we are cognizant of the fact that the anticipated timeframes- commencing on 1 January 2024 for specific companies- are impending.    Tungsten is closely following developments in Belgium with a firm view as to how we can best support our Belgian market considering any e-invoicing and e-reporting advances.   

Abolishment of certain Covid VAT measures In transitioning to a post-covid era, multiple countries are reviewing previously enacted fiscal measures to see whether they are still pertinent today. An integral component of the post-covid recovery is the reinstating of VAT rates imposed prior to the pandemic.   As Covid, or at least its impact, sharply declines globally, several countries are fully reversing fiscal measures ratified during the pandemic. Belgium’s reduced 6% VAT rate for masks, a direct response to the Covid pandemic, expired on 31 December 2022, and the VAT rate for masks will return to their former rate from 1 January 2023, in line with reduced demand.  

Extension of application of reverse charge Multiple countries use the reverse charge to reduce tax evasion and consequently reduce VAT gaps. The reverse charge mechanism operates by shifting the burden of paying VAT to the buyer rather than the supplier. This prevents the supplier from charging the VAT element but not paying VAT directly to the tax authorities. As a result, the reverse charge today is viewed as an effective measure by multiple EU Member States to regulate the flow of VAT to tax authorities.   Belgium has now extended the reverse charge mechanism to also cover the construction and public works sector and in doing so has widened the scope of services subject to fiscal policies that seek to control tax evasion.  

Budget tax proposals Governments often use budgets as a platform to showcase their fiscal policies for the coming year, and Belgium has signalled its intent to refine its tax measures in the coming year. Proposals in their budget include:

• Permanent 6% reduction for gas and electricity
• Increasing VAT on ‘unhealthy’ products and conversely reducing VAT on healthier products

Once again, countries are targeting specific community agendas, by adapting tax measures with a focus on advancing the health of individuals. Belgium is a compliant territory for Tungsten Network and will accommodate any new VAT rates as part of our solution.

Upcoming new format for VAT number Belgium’s standard VAT registration number comprises of a ‘0’ followed by 9 digits. The VAT number in a country uniquely identifies taxpayers.   As the current sequence of VAT numbers in Belgium is almost exhausted, the VAT number format is now in need of modification. It is expected that the number format will be exhausted within a year.  To this effect, the Banque-Carrefour des Enterprises is proposing to issue ‘1’ prefixed numbers to the existing Belgium VAT number format. Existing VAT numbers will remain unchanged.   This will require some action from businesses in terms of their accounting and ERP billing processes to accommodate the change.   If implemented, the change may also require some modifications to Tungsten’s internal systems. We are closely monitoring timeframes for the expected VAT number format change, while also assessing the impact of the potential VAT number format change. Tungsten Network will implement any required changes to accommodate the new number format when required.  

Reduced VAT rate extension for electric, gas and heating supplies The Russia / Ukraine conflict has compelled many countries to review their fiscal policies, especially in relation to electric, gas and heating - especially as Russia serves as conduit for many of these essential supplies.  Further to Royal Decree No. 2022015061, which entered into force on 1 August 2022, the Belgium tax authorities have cited the following changes: 

• Extension of the 6% reduced VAT rate on electricity supplies under residential contracts until 31 December 2022 
• Extension of the 6% reduced VAT rate for the provision of natural gas and energy heating systems from 1st August 2022 August 1 to 31 December 2022 
• A reduced VAT rate for certain heat pump operations, specifically on hybrid setups that use energy supply.  

Considering the continued conflict and rising inflation globally, we expect many other countries to enact similar fiscal policies over the coming autumn and winter. 

Covid-related VAT reductions 2020 and 2021 saw a proliferation in the tax rates countries deployed as a direct response to the unfolding covid pandemic.  2022 has seen countries attempt to steady their tax rates, but as part of the transition to a post-covid era, countries are still factoring in the pandemic as part of their wider fiscal agendas.  Belgium is one such country which envisages the effects of covid extending into the winter of 2022, as it announced that goods imported to combat covid-19 will be exempt from VAT until 31 December 2022.  

Update on B2B e-invoicing Belgium has shifted the timeframes for B2B implementation in line with the following: 

• 1 July 2024: mandatory e-invoicing for businesses with an annual turnover of more than 9 million 
• 1 January 2025: mandatory e-invoicing for small and medium businesses  
• 1 July 2025: all other taxpayers 

Member States require approval from the European Union to mandate e-invoicing. This is currently pending.   As previously stated, it is expected that Belgium will favour the PEPPOL e-invoicing model, in sharp contrast to recent mandates in Poland and Italy.  

Potential VAT reduction on fruits and greens 2022 has seen multiple countries adopting fiscal measures with a distinctly ‘green’ agenda. Such initiatives demonstrate that the VAT framework is intrinsically linked to broader social programmes.   Belgium is following the lead of its European neighbours in engineering markedly ‘green’ measures.   To this effect, the Green Party in Belgium has put forward a proposal to remove VAT on fruits and greens, citing, among other arguments, the spiralling cost of living fuelled by inflation.  

Potential 22% rate Country VAT rates are under constant revision and review. The High Council of Finance in Belgium has indicated that it is contemplating increasing the VAT rate to 22%. This is by no means definitive, but Tungsten Network will keep up to date with any developments and incorporate any new rates in our system.

Joint incentive to reduce the VAT gap Belgium, Netherlands, and Luxembourg representatives have convened to discuss plans to reduce the VAT gap. Although Continuous Transaction Controls (CTC) have proven to be extremely popular in the past few years, with a means to reducing the VAT gap, the VAT gap remains high- 134 million Euros was lost in revenue the EU in 2019. Shared borders and economic interests between the 3 countries have prompted the countries to work together to reduce this gap yet further- a key factor in the implementation of e-invoicing mandates.

Mandatory B2G e-invoicing A Royal Decree has been published outlining the modalities regarding the obligation for entrepreneurs in the context of public contracts and concession contracts (B2G). Below are a few key timeframes regarding e-invoicing obligations:

• 1 October 2022: public contracts and concessions the estimated value of which is less than European threshold
• 1 April 2023: public contracts and concessions the estimated value of which is less than EUR 30 000 excluding value added tax, but less than European threshold
• 1 October 2023: all public contracts and concessions

The Official Royal Decree can be found via the following link.

Scope of B2G e-invoicing expanded B2G e-invoicing regulations are already in place for multiple regions in Belgium (Brussels, Flanders and Wallonia). B2G e-invoicing will now be extended to the suppliers of all public entities in all regions across the country. The obligations will be implemented in a phased approach, based on the size of public contracts. The Belgian government has approved a royal draft decree to this effect. This draft law has not yet become law so the proposed dates are provisional, however, it is expected that by September 2023 the obligation will extend to all public contracts, irrespective of the value of the public contact. It is however expected that contracts below 3000 Euros will be exempt from the obligation to use e-invoicing.

Reduced VAT rate for electricity Last month we communicated that Belgium had taken some VAT-related measures as a direct result of the pandemic. Belgium has also introduced further VAT reforms - from 1 March 2022 to 1 July 2022, the VAT rate for electricity will be reduced from 21% to 6%.

Reporting obligations for digital platform operators – FAQs published

Specific reporting obligations for digital platform operators have been in place since 2021. These obligations request that digital operators inform service providers active on the applicable platform of their fiscal and social obligations. Digital operators also need to send to both the tax authorities and service providers information relating to the type of service rendered and any relevant amounts.
The Belgian Tax Authorities have recently published FQAs clarifying the scope of these reporting obligations. The first reporting deadline is as soon as 31 March 2022, and it is advisable that any affected digital operators refer to this for clarification of the legislation and their responsibilities.

Covid VAT reductions for mouth masks and hydroalcoholic gels

The Covid-pandemic continues to have a significant effect on the VAT measures countries are undertaking. Circular 2022/C/2 has extended the temporary VAT rate of 6% on the supply, intra-community acquisition and import of mouth masks and hydroalcoholic gels.

Further intentions to implement mandatory B2B e-invoicing

We recently published an update relating to Belgium’s intention to mandate B2B e-invoicing- and it looks like this is increasingly gaining more impetus. The Belgian Minister of Finance has reinforced Belgium’s intention to make e-invoicing mandatory in his policy note. This intention is mainly triggered by the need to reduce the VAT gap. Belgium’s VAT gap is high- amounting to 3.6 billion Euros, or 10.4% of the total VAT revenue, and mandatory e-invoicing is seen as a means to overcome this deficit.

This is still at early stages- no timeframes have yet been announced, and there are not yet any suggested working models for a potential e-invoicing mandate. However, it is difficult to ignore the increasing popularity of PEPPOL in Belgium in recent years- and so it seems likely that Belgium will rely on a similar model for its own e-invoicing mandate, drawing on its own experiences with PEPPOL to help build an e-invoicing model.

The full policy note can be found here.

Draft Royal Decree on B2G e-invoicing

The European Directive 2014/55/EU on e-invoicing for public procurement had already taken effect in law but was not yet implemented in VAT legislation. As a result, the Council of Ministers recently approved a draft Royal Decree on B2G e-invoicing which has now been submitted to the Council of State.

Advancements in the B2G landscape

From 1^st January 2022, e-invoices will be the preferred method for submitting invoices to Government organisations. It will still be possible to send invoices by post- but these must be sent to a specific address- SPW Finances – Centre de scanning – Avenue du Gouverneur Bovesse 29 – 5100 Jambes. Sending an invoice in PDF or Word format by email will no longer be permitted.
There will also be several new mandatory references on the invoices.