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Work on an immovable property by a foreign entrepreneur

If your business is active in the construction sector and performs works on immovable property abroad (i.e. outside its own country), you certainly know that tax and social aspects have to be kept in mind. VAT is one of the main challenges and the way that tax has to be dealt with depends on the EU Member State where the immovable property is located. At the occasion of a Parliamentary Question, the Belgian Minister of Finance provides a summary of the issue.

The answer of the Minister of Finance covers the situation where the foreign entrepreneur has no fixed establishment in Belgium. Still, the following questions have to be solved: Does the foreign entrepreneur have to register for VAT in Belgium? Is Belgian VAT to be charged? In order to answer those, it is actually necessary to make a distinction based on the VAT status of the customer of the foreign entrepreneur.

The Belgian customer qualifies as VAT taxable person who files periodical VAT returns

The place of supply of services connected to an immovable property is the place where the said immovable property is located (in accordance with art. 47 of Directive 2006/112/EC). Belgian VAT therefore applies in the case at hand. As the customer qualifies as a VAT taxable person filing periodical VAT returns, the reverse charge however applies and no VAT has to be invoiced by the foreign entrepreneur.

In addition, the dispatch of materials such as bricks, cement, nails, screws, concrete, from his  own Member State to Belgium (if any) gives rise to a so called transfer of own goods, which is assimilated to an intra-Community supply of goods in the Member State of dispatch and an intra-Community acquisition of goods in Belgium.

In principle, the foreign entrepreneur must be identified for Belgian VAT because of the transfer of own goods. He therefore has to apply for a Belgian VAT number and has to file periodical VAT returns in Belgium.

However, the Belgian authorities accept, by way of administrative tolerance, that the foreign entrepreneur does not register for VAT in Belgium for transfer of goods that will be incorporated in the building as a result of works in so far as the transactions which he carries out in Belgium are exclusively transactions for which he is not liable for VAT (i.e. transactions subject to the reverse charge).

(N.B.: The VAT registration in Belgium may be beneficial in certain circumstances and it could therefore be interesting to disregard the administrative tolerance. For further details in that respect, see: https://vatdesk.be/en/vat-flash/vat-registration/

The Belgian customer qualifies as a private individual

Once again, the services are deemed to take place where the immovable property is located, i.e. in Belgium. Where the customer is a private individual, the foreign entrepreneur is therefore liable for the Belgian VAT. This situation obliges him to get identified for VAT purposes in Belgium. He must then submit periodical VAT returns and pay the VAT due on the services rendered in Belgium.

Where applicable, the foreign entrepreneur also has to report the arrival of building materials coming from another Member State.

Source: Parliamentary Question No 230 of Mr. Benoit Piedboeuf of 20/02/2020