Lawyers and VAT - Circular letter published
We had already announced in a previous VAT alert (of 26 July 2013) that the lawyer's services in Belgium would be subject to VAT as from 1 January 2014. After a long drafting exercise, a circular letter has finally been published and details a tailor-made VAT regime for a smooth transition for the lawyers (Circular letter 47/2013, nr. 124.411 of 20 November 2013).
Subject or not subject to VAT - that is the ... option?
The circular letter provides a general principle according to which all lawyers are independent VAT taxable persons whose services are subject to VAT, regardless of their status (law firm, partner, associate or intern).
However, this general rule is "softened" in many cases :
- partners may in certain circumstances choose not to subject their services to VAT provided that their work would be considered as an industry contribution (apport en industrie / inbreng in bedrijvigheid);
- lawyers remain outside the scope of VAT with respect to the consideration that they receive as statutory directors of their firms (optional regime for legal persons acting as statutory directors);
- associates and interns working for a law firm may benefit from an optional regime pursuant to which not them, but their law firm will self-assess the VAT due on their services and will issue self invoices. These lawyers would be waived from their obligation to invoice and to file periodic VAT returns. Should they (and their law firm) agree to use such option, the lawyers will loose their input VAT deduction right; services supplied pro deo will be zero-rated, i.e. they will not be subject to VAT, but the lawyers that perform them will keep their input VAT deduction right;
- some specific services will remain out of scope (e.g. deputy judges, executive of the bar association,...) or exempt without input VAT deduction right (e.g. tutor, debt mediator, lecturer or university teachers,...).
General rules and practical points
In addition, the general rules concerning e.g. the place of supply, the chargeability or the VAT deduction are reminded and detailed in light of the sector's practice. Points of attention in this respect are a.o. the place of supply of services connected with immovable property, the transitory regime for services supplied at the end of 2013 and that would be invoiced before 31 January 2014, or the "historical" VAT on capital goods purchased before 2014 which may only be compensated during 2014 by the VAT due (on the lawyers fees). If such historical VAT would result in a VAT credit, this would only be reimbursed via the last VAT return of 2014.
New compliance obligations - Urgent actions
The new regime implies that the lawyers are required to request their VAT identification number to the local control office via the ad hoc form by 15 December 2013 and will therefore be expected to fulfill all VAT related compliance obligations as from January 2014...
Do not hesitate to get in touch with the contact persons listed here or with your regular contact at EY Tax Consultants for more information or assistance in this matter.