Modernization of the Belgian “VAT chain”: what is coming in 2024?
The Belgian Chamber of Representatives has approved the bill that will modernize the VAT chain as from 2024. Aiming at reducing the 'VAT gap', (which currently stands at 4.4 billion euros in Belgium), the purpose of these changes is also to tackle the slow procedure and manual processing of unsubmitted VAT returns by improving the VAT compliance chain with a set of new rules. The main changes of the VAT legislation are summarized hereafter.
Abolition of the VAT current account
The current account which keeps record of taxpayers’ VAT related debts and credits will be replaced by a so-called “VAT provision account” for credits and voluntary/provisional payments only (VAT debts will be managed via a different application).
Under the existing rules, only the net balance of all accumulated VAT credits can be claimed, subject to specific conditions and scrutiny by the tax authorities. The new “VAT provision account” is aimed at giving taxpayers more flexibility by also allowing refund claims for part of their credits through the “My Minfin” application. The refund procedure, the details of which will be adopted by Royal Decree, should therefore be simplified.
In addition, the special VAT account, imposed by the tax authorities in case of late or non-submission of VAT returns or non-payment, will also be abolished.
Refund procedure
Currently, VAT refunds can only be requested through the VAT returns on a quarterly basis, with the exception of new taxpayers starting their activities (“starters”) and taxpayers holding a special monthly refund authorization (and to the extent both are monthly filers). According to the new legislation, all monthly filers will be allowed to request each month the refund of the VAT credit pertaining to the relevant VAT return period. Other VAT credits accumulated on the new VAT provision account will be requested through a different procedure (see above).
These refunds will however only be processed by the tax authorities provided that the taxpayer timely submitted its VAT returns of the past six months, and provided that the VAT credit amounts to at least EUR 50.
“Substitute VAT return”
To encourage taxpayers to submit their VAT returns on time and to tackle losses of VAT revenues caused by late or non-filing, a new type of return will be implemented. In the event that no VAT return is submitted within the 3 months following the relevant VAT return period, taxpayers will receive a proposal for a substitute VAT return. The latter will be automatically prepared with an amount of VAT due equal to the highest VAT payable amount reported in the VAT returns (box 71) of the last twelve months, with a minimum of EUR 2.100 (also in case no VAT returns were submitted during the last twelve months).
Upon reception of the proposed substitute return via registered mail, taxpayers will still be able to react by filing the missing VAT return within a month. Notwithstanding the application of late-filing penalties, this VAT return (if submitted within a month) will be considered as validly submitted, hence overwriting the substitute VAT return. If no VAT return is filed within a month, the proposed substitute return becomes final and can only be appealed against through the existing administrative or judicial proceedings.
New filing deadline
The filing deadline for quarterly VAT returns will be extended by 5 days (from the 20th to the 25th of the month following the reporting period) whereas the deadline for submitting monthly VAT returns will remain unchanged (20th of the following month). In addition, the existing administrative tolerances allowing later-filing without penalties being imposed will no longer apply. In this respect, no specific tolerances are referred to in the explanatory statements of the bill and it is possible that this change will entail the end of the “summer postponement” tolerance (whereby the filing deadline for the VAT returns of June and July, and the second quarterly VAT return of the year, is extended to the 10th of the second month following the reporting period).
Legal timeframe to answer information request from tax authorities
Although in practice the tax authorities often prescribe a timeframe of two to four weeks to respond to their requests for information (e.g. during VAT audits), there is currently no legal ground for such practice nor any timeframe defined in the VAT legislation.
A mandatory response time of one month will now be introduced in the Belgian VAT Code and the tax authorities will even be allowed to shorten this period to 10 days when the rights of the Belgian Treasury are at risk or if the request for information relates to a VAT refund request.
It is worth noting that the tax authorities, on the contrary, are not subject to any prescribed timeframe when responding to taxpayers.
Payment through direct debit
Finally, it is also foreseen that taxpayers will be able to pay their VAT debts by using a direct debit.
Almost all of the above-mentioned changes are expected to come into force as from January 1st, 2024 (with the exception of the changes pertaining to the VAT provision account and the monthly refunds via the VAT returns which would come into force as from February 1st, 2024). However, given the important IT developments required by the current VAT chain reform, the adopted bill foresees the possibility to postpone the entry into force to a later date, but no later than January 1st, 2025.
