New rules on the VAT reverse charge mechanism on immovable property

The current article 20 of Royal Decree No. 1, states that the reverse charge mechanism applies if a taxable person established in Belgium performs immovable work in Belgium for either:

• a taxable person established in Belgium who is required to file periodic VAT returns or;
• a taxable person not established in Belgium with VAT registration through the appointment of a fiscal representative.

As from the first of January 2023 some important changes with regard to the reverse charge mechanism will come into force:
 

1. The requirement of a fiscal representative in case of foreign customers will be abolished

When the customer is a foreign taxable person with a Belgian VAT ID number, it will no longer be required to check if a fiscal representative has been appointed in order to be able to apply the VAT reverse charge mechanism.

In other words, work on immovable property performed for a foreign taxable person with a direct VAT registration will be subject to the reverse charge for work on immovable property.

2. A notification requirement in the hands of the customer will come into force

As from the first January 2023, the customer will be legally required to inform his supplier if he does not meet the conditions to apply the reverse charge mechanism for work on immovable property. This will be introduced to facilitate the identification of Belgian customers registered for VAT purposes but not submitting periodic VAT returns. For example Belgian customers applying the small enterprises scheme.
 

3. A new reference to mention on the invoices issued by the service provider

The new article 20, § 3, first paragraph of Royal Decree No. 1 states that invoices issued by the service provider need to contain the following reference:

“Reverse charge. In absence of a written dispute within a period of one month from receipt of the invoice, the customer is deemed to acknowledge that he is a taxable person required to submit periodic VAT returns. If that condition is not met, the customer is liable with respect to that condition for the payment of tax, interest and fines due.”

Taking the above into account, the new article 20, § 3, second paragraph of Royal Decree No. 1 states that, “except in the event of collusion between the parties or obvious breach of the provision, the service provider is released from his liability with regard to the requirement to check whether the customer is obliged to submit periodic VAT returns, if the customer has not contested the invoice”.

In other words, the lability will be shifted to the customer by lack of written dispute within a period of one month after receipt of the invoice which should include a special reference as from the first January 2023.

Taking into account the above, it will be of importance to

• review your customer base and check whether the VAT treatment is to be updated. Note that VAT which has unduly been charged is not deductible in the hands of your customer;
• adjust your ERP systems in such a way that the required invoice reference is being captured;
• timely inform your supplier in case the conditions to apply reverse charge are not met. Otherwise, you will be liable for any damage resulting from your lack of communication.

We are happy to further assist with any of the above or provide you with further details.