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  VAT news - VAT invoicing and long term hire
 
VAT invoicing and long term hire
 
On 21 December, the Belgian State Gazette published two Acts dated 17 December 2012 to implement two European VAT directives regarding the rules on VAT invoicing and the place of supply in respect of long term hiring of means of transport.

VAT Invoicing

The first Act of 17 December 2012 implements Directive 2010/45/EC with respect to VAT invoicing. It must simplify the rules for electronic invoices and it introduces a rule for “implicit acceptance” of self-billing. Moreover, it changes the rules on chargeability of VAT.

Belgium is at the forefront of electronic invoicing. The VAT legislation authorises the electronic transmission of invoices if the contracting partner (that is he who receives the electronic invoice) accepts the invoices and if there are guarantees of both the authenticity of origin and the integrity of the content of the invoice, through e.g. an advanced mechanism of electronic signature, an exchange of computerized data.  However, the law specifies some aspects and simplifies some rules.

The VAT code will give a wide definition of 'electronic invoice' and it specifies that the contracting partner can accept the electronic invoice implicitly (e.g. by paying the invoice). Moreover, the code will state that the authenticity of origin and the integrity of content can be guaranteed through internal business controls.

Irrespective of the original form, the VAT payer can store invoices on paper or electronically, as long as the authenticity or origin, the integrity of content and the readability are guaranteed during the whole period of storage.  The code now specifically states that electronic invoices may be stored on a server outside Belgium, even outside the territory of the European Union.  With respect to the storage of invoices the Act provides that invoices must be kept for a period of 7 years.

Self-billing is the situation where the client draws up the invoice for and on behalf of his supplier, used to require a written agreement between parties and a procedure of acceptance by the supplier for each invoice.  In the future, the implicit acceptance of the invoice will be sufficient. This can result from the invoicing by the contracting partner or a payment by the supplier. Please note that even if a written agreement can no longer be imposed, it does, however, always remain advisable.

When is the VAT due ?

At present, VAT is payable when the supply of goods or services is completed or when all or part of the price is received but also when it is invoiced even before completion of supply or before payment. In practice, this meant that the VAT was due by the supplier when he issued an invoice to his client and that the customer could recover the VAT when he had received an invoice.

That rule will be modified as of next year : issuing the invoice will become irrelevant. VAT will only be due when the supply of the goods or the services is completed or when the payment is received.  Even if the invoice is issued before the supply or the payment, the VAT will not become payable until the goods or services are supplied or until the price is paid.

VAT payers will have to adapt their accounting systems.

In B2C situations (and more specifically in the case of the supply of goods and services to individuals), the VAT will become payable to the extent that the price is received irrespective of whether an invoice is issued.

In B2B (business to business) situation, the VAT reporting will have to be disconnected from the date of the invoice. When the VAT is payable (and deductible by the customer) when the invoices is issued, the VAT return can be linked to the accrual accounting of invoices. If the date of the invoice becomes irrelevant, the VAT payer must still record the invoice when it is issued, but the VAT only becomes payable or deductible when the price is actually paid or when the goods are delivered or the services supplied. 

There was a problem when the VAT payer invoices an advance on the price of the goods of services, in particular because the rule was maintained that the VAT became payable when the supplier issued the invoice. The Minister of Finance confirmed that a supplier could still issue an invoice to charge an advance to this customer, but that the VAT did not become payable. Moreover, the customer could record the invoice but could only deduct the VAT when the price was paid or the goods or services supplied.

However, 1 January is only a few days away, and VAT payers will not be able to adapt their accounting software and their accounting procedures in time. On 19 December, the VAT authorities published decision ET 123.563 introducing a one year transitory period where the VAT on an 'advance invoice' will be due on the date of the invoice and where that VAT will also be tax deductible for the customer. As an alternative, the VAT authorities suggest sending 'payment requests' for the full amount including the VAT, but without mentioning the VAT ; whereby the payment of the VAT is suspended until it is actually paid. However, accounting advances may create more complications than it may solve.

A few other rules

The supplier will have some more time to issue an invoice : until the 15th working day (instead of the fifth) of the month after the chargeable event occurs.  No invoice must be issued for the exempted financial services even if the recipient of the services is established outside the European Union. 

When the VAT-payer reverse charges the VAT, the phrase “reverse charge” will be sufficient without a clear reference to the legal provisions being needed.

It is also important to note that the Member State which has the power to establish the invoicing rules is the Member State where the transaction is deemed to take place, except when the transaction is located outside the European Union or when the client must pay VAT in another Member State. In these two cases, the Member State which has the power to establish the rules of invoicing is the Member State of the supplier. This will be important to determine whether the invoice is valid.

The new rules will become effective from 1 January 2013.

Long term hiring

The second Act of 17 December 2012 implements Directive 2008/8/EC as regards the place of supply of long term hiring of means of transport. The directive changes the following rules which will entail a significant change to the current situation.

The place of supply of long term hiring of a means of transport to a non-taxable person (B2C) will no longer be the place where the supplier is established but the place where the customer is established, has his permanent address or where he usually resides. As for the long term hiring of a pleasure boat to a non-business person, the place of supply will be the place where the boat is actually put at the disposal of the customer, where this service is actually provided by the supplier from his place of business or a fixed establishment situated in that place. These new rules will apply as of 2013.

The term 'long term hiring' covers the long-term lease of vehicles, including motorcycles, cars, buses, trucks, aircraft, and railway wagons, for a continuous period in excess of 30 days (for vessels, the minimum duration is 90 days).  This also includes the leasing of company cars to employees for consideration (possibly against a reduction of remuneration), will be subject to a significant change. Under the current rules, if the lessor was established in Luxembourg, the lessee paid Luxembourg VAT at 15 % instead of 21 %. As of next year, the Luxembourg lessor will have to register with the Belgian VAT authorities to comply with his VAT obligations.



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