The Author of the Article
VAT is recoverable on your expenses
If your company has incurred VAT on expenses paid in Belgium, it is, in principle, entitled to claim the full VAT back from the Belgium VAT authorities. This recovery of VAT (known as the ‘”right to deduct” or the “right to refund”, depending on the situation) is an integral part of the VAT system.
Let's take an example
A Belgian supplier sells a machine (which remains in Belgium) to a German company. The Belgian supplier should issue an invoice with Belgian VAT, which the German company will be able to claim back from Belgian VAT authorities: either via its Belgian VAT return (“right to deduct”) or via a special electronic procedure (“right to refund”) if the German company is not VAT registered in Belgium.
What are the rules in Belgium?
Your company can normally reclaim 100% of the Belgian VAT incurred on its expenses.
However, Belgium has used the option provided by the VAT Directive to exclude or reduce VAT recovery on certain goods and services which it already exercised before January 1st, 1979 ("standstill clause" - art. 176 VD).
For a number of categories of expenses, there is therefore no right of deduction. This means that you can not obtain a VAT refund. Such expenses notably include:
- Accommodation and restaurant services : 0% recoverable unless these costs are incurred by an employee providing goods or services away from business premises or are incurred by a company who in turn provide the same services in return for payment.
- Reception costs: 0% recoverable
For a number of categories of expenses there is only a limited right of deduction. This means that you can only obtain a partial VAT refund. Such expenses notably include:
- Vehicle costs (passenger cars): deduction based on business use, up to a maximum of 50%.
- Equipment that is not used solely for business purposes (telephone, ICT equipment, etc.): deduction based on business use. The deduction is recoverable up to 75% maximum
The VAT expert's eye
VAT is a tax which, in principle, is neutral for your company. If your company buys goods or services with VAT from abroad, it can claim this VAT back from the local treasury, which may offer a significant opportunity to reduce tax costs.
However, to achieve this result, your company must respect the rules of the VAT game, including 5 major principles:
- Improve your internal VAT recovery process (by tracking all expenses with foreign VAT)
- Ensure that local VAT has been correctly invoiced by the supplier
- Check whether VAT is fully or partially recoverable in the country
- Receive an invoice from your supplier with all mandatory details (name, address and relevant VAT number of the parties involved, detailed description of goods or services, etc.)
- Use the correct refund procedure
If your company fails to comply with any one of these 5 key principles, it may never recover the VAT paid on its expenditure.