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.
- Restaurant and catering services (excluding the provision of beverages).
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 (the area condition is scrapped as from 1 January 2021 until 31 December 2022 - Due to the floods in the summer of 2021 an additional administrative tolerance is provided under certain conditions).
- 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 2021).
- The supply of hair prostheses under certain conditions (expected as from 1 January 2021 but draft law still needs to receive approval).
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 31 December 2021).
- 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 (as from 1 January 2022 the exemption can only be applied for medical services that have a therapeutic purpose).
- 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 in accordance with the tariff nomenclature and the six General Rules of Interpretation (GIR). An import duty rate is linked to every commodity code and is based on TARIC level.
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 in principle 12% but where various lower tax rates exist (i.e. 3% for the purchase of the only and own home). Please note that there has been a change regarding these tax rates starting from the 1st of January 2022 as the general tax rate in the Flemish Region was 10% and the tax rate for the purchase of the only and own home was 6% until the 31st of December 2021.
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%, to be calculated on an uncapped income. 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. Note that contribution rates for blue collar workers are significantly higher and are highly dependent on the industry.
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.
The employees’ social security contributions are fixed at 13.07% and are also to be calculated on an uncapped income. Employees with a monthly gross salary of +/- 2,600 EUR or less are entitled to an automatic reduction of the personal contributions (i.e. “Employment bonus”).
When calculating the social security contributions for blue collar workers (both employees’ as well as employers’ contributions) the calculation should always be done on the basis of 108% of the normal gross salary.
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.