Belgium: Draft legislation modernizing “VAT chain” passed by Chamber of Representatives

The Belgian Chamber of Representatives on 2 March 2023 passed draft legislation that would modernize the existing value added tax (VAT) compliance and VAT refund processes, as well as the VAT procedural rules (referred to as the so-called “VAT chain” reform).

The Belgian government first published draft legislation to modernize the system of periodic VAT returns and the enforcement of VAT debts in December 2022. Read TaxNewsFlash

The draft legislation includes the following key measures:

• The filing deadline for quarterly VAT returns will be extended from the 20^th day to the 25^th day of the month following the reporting period. For taxpayers subject to the monthly VAT reporting regime however, the filing deadline will be kept at the 20^th day of the month following the reporting period. The administrative tolerance of not imposing late filing penalties if the VAT return is ultimately filed by the 10^th day of the 2^nd month following the reporting period, will no longer apply.
• In case of non-filing of the VAT return, but not earlier than after a three-month timeframe following the relevant return period, the VAT authorities will issue a proposal for a “substitute” VAT return to the taxpayer. This substitute return will assume an amount of VAT due based on the highest of the VAT amounts due that have been reported in the periodic VAT returns relating to the preceding 12 months, with a minimum amount of €2.10. The taxpayer is given a deadline of one month to respond to the proposed substitute return and the only way to do so is by filing the missing VAT return. If the missing VAT return is not filed within that month, the proposed substitute return will be considered final. In that scenario, the only option left for the taxpayer to challenge the return, is by lodging an administrative appeal or through court. This procedure should encourage taxpayers to always file their VAT returns in due course.    
• Currently, taxpayers can as a default rule only apply for the refund of their VAT credits via the VAT return four times a year. Monthly filers can however formally request monthly VAT refunds if they fulfill certain conditions relating to their VAT credit position or if they are considered as start-ups (i.e., during the first 24 months of their economic activity in Belgium). As from 2024, the monthly VAT refund will become the standard for all taxpayers filing monthly VAT returns, without the need of having a monthly VAT refund authorization.
• Under the current rules, a request for refund in the VAT return applies not only to the VAT credit resulting from the relevant return period but to all potential accumulated VAT credits from the past on the VAT current account. As from 2024, a request for refund via the VAT return will only have effect as regards to the VAT credit resulting from that return. The refund of the accumulated VAT credits from previous periods will have to be requested via a separate procedure, more specifically via the taxpayer’s account on the “MyMinfin” e-portal. In this respect, the VAT current account will be abolished and replaced with a new tool, i.e., the so-called VAT “provision” account. The specific modalities of this provision account are not yet known in detail but based on the draft law, it will be a more practical tool for the taxpayer to manage VAT refunds and payments. Finally, refund requests via the VAT return will only be possible provided that the taxpayer timely filed the VAT returns of the preceding six months.
• As regards the VAT procedural rules, to this date, the response time for requests for information has not been defined in law. The draft legislation would introduce a statutory response time of one month within which taxpayers must reply to written requests for information by the VAT authorities. This can be reduced to 10 days in case the rights of Belgian Treasury would be compromised and/or when the request forms part of a VAT refund audit conducted by the VAT authorities. Failure to respond by the deadline may result in conservatory holding on the VAT credit.
• Introduction of the possibility to pay VAT debts through direct debit.

The “VAT chain” reform aims to modernize the processing of the periodic VAT returns as well as of the VAT refunds and VAT payments, so that these processes become more efficient from both the taxpayers’ and the VAT authorities’ perspectives. The broader goal is to further reduce the big gap in Belgium between the VAT revenue that should be collected and the VAT revenue that is actually collected (the so-called “VAT Gap”). This gap is not only caused by events such as VAT fraud but also results from the existing procedures at the level of the Belgian tax authorities that, to a high extent, rely on manual interventions (i.e., prone to human errors).

The anticipated effective date of the rules under the draft legislation is 1 January 2024. However, given the significant information technology adjustments that will need to be implemented, the draft legislation preserves the right to postpone the effective date to a later date, but in any case, no later than 1 January 2025.

Read a March 2023 report prepared by the KPMG member firm in Belgium