Value-added tax (VAT)
Scope of VAT
The following transactions are subject to VAT in Belgium if they are considered to take place in Belgium:
- The supply of goods and services effected for consideration by a taxable person acting as such.
- The acquisition of services for consideration from outside Belgium between taxable persons.
- The importation of goods.
- Intra-Community acquisition of goods for consideration by a taxable person acting as such or by a non-taxable legal person (including the transfer of assets).
- The self-supply by a taxable person.
Intra-Community supply and intra-Community acquisition
An intra-Community supply of goods is a supply of goods whereby the goods are moving from one EU member state to another EU member state. In the member state of departure of the goods, the goods can be, under certain conditions, VAT exempt. As a result, the intra-Community acquisition of the goods (i.e. the arrival of the goods in the other member state) will be taxable.
Standard and other VAT rates
The standard VAT rate is 21%. This rate applies to all goods and services not qualifying for one of the reduced VAT rates.
The following supplies of goods and services have a 12% VAT rate:
- Phytopharmaceutical products.
- (Inner) tubes.
- Certain combustible material.
- Social housing (including private initiatives) and certain renovation works on immovable property.
The following supplies of goods and services have a 6% VAT rate:
- Works on immovable property (limited in time and with strict conditions).
- Basic necessities, such as food and pharmaceuticals.
- Distribution of water through pipelines.
- Some printed materials and electronic publications.
- Transport services of persons.
- Hotels and camping.
- Use of cultural, sporting, and entertainment venues.
- Works of art, antiques, and collector's items.
- Supplies of cars for the disabled, as well as equipment and accessories for such cars.
- Supplies of certain devices for therapeutical use.
- Contract farming.
- Repair of bicycles, shoes and leather goods, clothing, and household linen.
- Some housing for private use, for the disabled, and in the social sector.
- Concerts and exhibitions.
- Some medical equipment.
- Goods and services supplied by social organisations.
- Demolition and reconstruction of buildings located in certain areas under certain conditions (proposal is pending to temporarily scrap the area conditions as from 1 January 2021 until 31 December 2022).
- Certain products intended for intimate hygienic protection.
- Maintenance, repair, and rental of external defibrillators.
- Face masks and hydro-alcoholic gels (temporarily from 4 May 2020 until 31 December 2020 - proposal is pending to extend this measure until 31 March 2021).
- Restaurant and catering services, excluding deliveries of beers with an actual alcoholic strength by volume exceeding 0.5% vol. and other beverages with an actual alcoholic strength by volume exceeding 1.2% vol. (temporarily from 8 June 2020 until 31 December 2020).
The following supplies of goods and services are VAT exempt with credit (‘zero-rated’):
- Exports and certain related services.
- Intra-Community supplies of goods and certain related services.
- Imports, intra-Community acquisitions, and local trades of goods within VAT warehouses or under special customs regimes.
- Import of goods intended to be used to combat the effects of the COVID-19 outbreak, under specific conditions (temporarily from 30 January 2020 until 30 June 2020).
- Certain transactions on goods placed in a customs or VAT warehouse.
- Cross-border passenger transportation by ship or aircraft.
- Supplies to diplomats and international organisations.
- Certain supplies of goods and services to certain vessels and aircraft mainly involved in international passenger transport.
- Certain (digital) periodic publications like newspapers, journals, and magazines.
- Supply of recovered goods or products.
The following supplies of goods and services are, in principle, VAT exempt without credit:
- Healthcare services, excluding certain types of cosmetic surgery (conditions will be amended as a consequence of case 194/2019 of the Belgian Constitutional Court).
- Social services.
- Education services.
- Sport services.
- Cultural services.
- Banking services.
- Interest charges.
- Financial services (option to tax possible for paying and cashing services).
- Insurance services.
- Land and real estate sales.
- Property leasing and letting (option to tax possible as of 1 January 2019).
It should be noted that specific conditions may apply to the above two categories.
Under a VAT group, independent legal persons are treated as one single taxable person for VAT purposes if they are closely linked financially, economically, and organisationally. Hence, for VAT purposes, all supplies of goods and services to or by the group members are deemed to be made to or by the group itself.
The application of a VAT group has, amongst other, the following consequences:
- No issuance of ‘inter-company’ invoices between companies in the VAT group (however, internal documents will be required).
- No charging of VAT between companies in the VAT group (avoiding VAT pre-financing).
- No cascade of limitation of the right to deduct VAT when on charging costs to companies in the VAT group.
- Head office abroad outside the VAT group will be seen as a third party and will trigger VAT on head office/PE services.
- Mutual liability between VAT group members.
- Filing of one VAT return for all companies in the VAT group.
- Statistical reporting to NBB for members of a large VAT group (i.e. with an annual turnover of at least EUR 15 million). Optionally, the VAT group representative can file the information on behalf of the members.
Goods coming from outside the EU and imported into Belgium are subject to import duties. Import duties are calculated based on three main elements:
All products are classified based on the rules laid down in the Combined Nomenclature (CN). All products traded in the world can be classified according to the tariff nomenclature. An import duty rate is linked to every CN-code.
Based on international trade agreements (i.e. bilateral), a preferential import duty rate (i.e. a lower import duty rate) may apply to products imported in the EU in case the goods meet the applicable criteria in the country benefiting from the agreement.
The customs value is determined based on one of the six rules laid down in the Union Customs Code (UCC). The most commonly used rule to determine the customs value upon importation in the EU is the ‘transaction value’ (i.e. Article 70 of the UCC).
These valuation rules are harmonised on a global level through Article 7 of the General Agreement on Tariffs and Trade (GATT) valuation agreement.
Various economic customs regimes (i.e. bonded warehouse, inward processing procedure, outward processing procedure) are available, allowing optimisation schemes throughout the supply chain.
Excise goods are divided into the following two groups:
- Community excise products: These are defined as excise products at the EU-level, and the same procedures (i.e. excise applications, suspension regimes) should apply in all EU member states. Products in scope are (i) alcoholic beverages, (ii) energy products, and (iii) manufactured tobacco.
- National excise products: These can be defined at the member state level on a voluntary basis. Belgium has identified the following goods as being ‘national excise products’: (i) non-alcoholic beverages (i.e. soda and water) and (ii) coffee.
The EU determined the threshold (with minimum and maximum rates) in which the EU member states have to define the applicable excise duty rate per product on a national basis. With respect to the national excise goods, every member state has the liberty to freely decide upon the national excise duty rates applicable.
Immovable property is subject to an immovable WHT (also called ‘real estate tax’) due on a yearly basis to the region in which the property is located. This tax is calculated as a percentage of the so-called ‘cadastral income’ of the property (a kind of ‘deemed’ rental income). This deemed rental income should constitute the average normal net income of one year (based on rental incomes of similar properties in 1976). Since the cadastre has not been updated since 1976 and since this merely concerns a fictitious income, this 'deemed' rental income can only be considered as a presumed income, which generally will not match the actual income the immovable property could generate.
The tax rate depends on where the property is located (as it is a combination of regional, provincial, and communal tax).
Machinery and equipment can also be considered as immovable property if certain conditions are met (e.g. sustainable connection to the property although intrinsically being movable property).
Purchases and transfers of real estate located in Belgium, including buildings (except new buildings, which are subject to VAT as described above), are subject to registration duty at the rate of 12.5% of the higher of transfer price or fair market value (except in the Flemish Region, where the applicable rate is 10% or 6% for the purchase of the only and own home). Subject to certain conditions, investors could be considered as being ‘professional real estate sellers’. This regime would allow them to acquire immovable properties at a lower RETT rate. In order to benefit from this regime, various conditions apply.
If the purchase or transfer of land is subject to VAT, no registration duties will be charged on the purchase or transfer.
In principle, no registration duty is due upon a capital contribution; only a fixed fee of EUR 50 is due.
Stamp duties are due on transactions relating to public funds, irrespective of their (Belgian or foreign) origin, that are concluded or executed in Belgium (including when the order is given directly or indirectly to a foreign intermediary by a Belgian resident or a legal entity for the account of a seat or establishment thereof in Belgium), to the extent that a professional intermediary intervenes in these transactions. Exemptions for non-residents and others are available.
In Belgium, there are no payroll taxes applicable other than those for social security contributions (see below) and income tax withholding.
Social security contributions
The employers’ social security contributions in Belgium amount to 25%. This percentage consists of the base rate of the employers’ contribution (i.e. 19.88%) and the wage moderation (i.e. 5.12%).
On top of this base rate and wage moderation, additional general contributions should be calculated, namely the contributions to the Asbestos Fund, the Closure Fund, the sector-specific fund for subsistence, etc. The average employers’ contribution for white collar workers would thus best be estimated at 27.50%. However, deviations may occur depending on the specific sector.
For low wages a reduction on the employer social security contributions applies, next to specific target group reductions. Moreover, for certain types of employers, a structural reduction, combined with a low or high wage component, may apply, next to specific target group reductions.
Social security contributions are deductible in determining taxable income both for the employer (CIT) and for the employee (PIT).
Foreign employees working temporarily on the Belgian territory in the context of a secondment or on a more permanent basis in the context of a multistate employment may in some cases be exempt from Belgian social security contributions on the basis of any bilateral or multilateral totalisation agreement which Belgium may have concluded with the home country or if they are employed by a foreign legal entity.