VAT - 2021 year-end points of attention

Each year at year-end some specific VAT topics come up. Also now, as this year is coming to an end, there are some VAT topics that we would like to bring to your attention. Some of those topics are opportunities that might improve your cash flow position whilst others could trigger an additional VAT cost, unless they are set-up in correct way.

Below we have highlighted some VAT topics of which we believe that they might be of interest to you at the end of this year. If needed, we can of course organize an online meeting to further discuss those topics in detail and to check the specific impact thereof on the VAT position of your company.

• Are you planning to give a present to your staff or to your business relations to celebrate the holidays?
  At this particular year-end, it could be that the company wants to give a year-end gift to its personnel or to some business relationships. We would like to bring to your attention that depending on the value, the nature and the number of gifts given throughout the year, the VAT incurred on the purchase of the gifts might either be deductible or might form an extra cost for the company. Indeed, VAT is deductible only for one gift per calendar year per beneficiary and on the condition that the value is lower than 50 euros. But also the nature of the gift can have an impact on VAT. Did you for example know that from a VAT point of view it is more interesting to give a bottle of wine than a bottle of gin as present as the VAT on the purchase of wine might be deductible whilst this is not the case for gin? Also when donating a voucher, the type of voucher may have an impact on the VAT cost involved, since on the purchase of multi-purpose vouchers no VAT is due whilst VAT is to be paid on the purchase of single purpose vouchers. So if the company wants to give a present to its staff or business relations, it is advisable to upfront verify which kind of presents are from a VAT perspective the most beneficial to give, in order to avoid that by giving a present the company itself receives a unpleasant VAT present
  
  
• Are you planning to donate to charity?
  When a product is given away for free, the donator in principle needs to account for VAT if the input VAT has initially been deducted. Nevertheless, in certain cases no VAT is due in case unsold products are donated for charitable purposes. So if it is the intention to donate goods for free, it is advisable to upfront check how this donation can be structured in order to avoid negative VAT consequences.
  
  
• Do your VAT returns result in a VAT payable or VAT credit position?
  In principle both for quarterly and monthly VAT returns, a VAT advance payment had to be made by 24th of December. However, the authorities have definitely abolished this prepayment requirement as from this year. In addition, the minimum amount for the refund of a VAT credit resulting from the December or 4th quarter VAT return has been lowered from 245 euro to 50 euro. 
   
• Have you thought about claiming the refund of VAT on bad debts?
  A sad result of the Covid-19 pandemic might be that more customers than usually have payment issues and that hence a substantial amount of your sales invoices remains unpaid. It might also be that for accounting purposes a bad debt provision is created at year-end. But did you know that VAT on bad debts can under certain conditions be reclaimed if the claim is most likely uncollectable, even if the concerned customer is not (yet) officially bankrupt? This can be an important cash-shaving opportunity. Therefore, it might be worthwhile to check the list of clients with bad debts and check whether a refund of VAT relating to those claims can already be asked.

• Are you performing year-end TP adjustments?
  Traditionally, at year-end companies belonging to multinational groups are required to review their intragroup transactions and to evaluate whether pricing adjustments are required in order to ensure that the applied intra-group pricing policy is in line with the “arm’s-length principle”. Since a TP adjustment might trigger an increase or decrease of the intercompany pricing, this might also affect the amount of payable and deductible VAT. Adjustments to the VAT reporting of the intragroup transactions that took place during the past year might therefore be required. So when performing TP adjustments, specific attention should also be paid to the potential VAT impact.
  
  
• Are you filing Intrastat returns?
  If so, you should be aware that all EU Member States are currently implementing a significant number of changes in their Intrastat returns (such as changes of Intrastat fields, new reporting requirements, new Intrastat reporting thresholds, etc.) that will enter into force as from 1 January 2022.

Next to the VAT topics we also want to inform you on some real estate tax topics that might be of interest to you.

• Has your company been touched by the floods that occurred from 14 to 16 July 2021 in the Walloon region or confronted with unproductivity of the buildings/industrial equipment in the Flemish/Walloon region?
  If so, than it might be worthwhile to consider if you qualify for a reduction of the annual cadastral income tax on real estate (or property tax). Due to a (temporary) decrease of productivity, it can be worthwhile to file an appeal against the tax assessment of 2021 to obtain a proportional rebate of the real estate tax already paid. Especially for the Walloon region it can be very interested since the government has confirmed that the floods had to be seen as force majeur as a consequence that the conditions for obtaining the proportional rebate (or in case of destruction a structural rebate) are limited.
  
  
• Disinvestments/replacements of the industrial equipment and/or sale of a building?
  The only way nowadays to obtain a decrease of the historical taxed cadastral income is by reporting disinvestments/replacements of the industrial equipment and by reporting the destruction/sale of a building. In practice, we often see that those are not reported and/or processed correctly by the companies and/or the administration which leads to an additional cost for companies. Thus, it is now more important than ever to have a deeper look into the assessment notice and to file an appeal against it in due time if necessary in order to obtain a potential refund of the real estate tax already paid.