Lawyers' services in Belgium

Subject to VAT as of 1 January 2014

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On 30 June 2013, the Belgium Government reached an agreement on new budgetary measures for 2013 and 2014. It resulted a.o. in a project of enactment dated 8 July 2013 (Doc 53 2891/004 of the Belgian lower house of Parliament).

This project states in its n°31 and 32 that services performed by lawyers will become subject to VAT at the normal rate of 21% as from 2014. On the other hand, lawyers will become entitled to the deduction of input VAT.

This measure follows a long debate re. the controversial VAT exemption on lawyers' services in Belgium. Belgium was indeed the only (lonely...) Member State applying such exemption as a survival of a VAT regime in force in Belgium before the entry into force of the (6th) VAT Directive in 1977.

The taxation being the rule, the VAT Directive had indeed "frozen" the maximal scope of the exemption to the one that was prevailing at the time of its entry into force (by way of the so-called "stand-still clause"). According to the law and the administrative comments at the time, such exemption was limited to the services of lawyers entitled to plead their cases before the Belgian courts. However, the EU Commission deemed this restriction contrary to the fundamental freedoms of other (EU) lawyers and sent a formal notice to the Kingdom of Belgium in 1999.

In 2001, Belgium consequently amended its administrative comments to extend the VAT exemption to EU lawyers as well, which was deemed by some authors as being contrary to the stand-still clause, leaving Belgium with no other choice but to tax all lawyers services.

The following scheme summarizes the chronological issues explained above.

The criticisms of the VAT scholars were finally echoed into Belgian law when they happened to match... budgetary needs. Along the same lines of "pragmatism", it could be expected that lawyers would have to bear provisional measures limiting the immediacy of their VAT deduction right with respect to the acquisition of investment goods prior to 2014.

Should you have any queries concerning the above, do not hesitate to contact Benoît Pernet and Yves Bernaerts.