The Author of the Article
To keep in mind
This article explains the application of the reverse charge mechanism for VAT in Belgium's construction sector. It clarifies when the reverse charge applies and the importance of compliance for businesses involved in construction activities.
Here are three key takeaways:
- Reverse charge for construction services: Belgium applies a reverse charge mechanism for VAT on certain construction services provided by a Belgian company to another taxable person.
- Who is subject? The reverse charge applies when the recipient is registered for VAT in Belgium.
- Compliance is crucial: Failing to comply with the reverse charge mechanism can result in penalties for both the supplier and the recipient.
VAT reverse charge in the construction sector (art. 394 of the VAT Directive)
VAT is normally due by the person supplying goods or services.
To tackle fraud, Member States in which the VAT is due may provide for that the person liable for the payment of VAT is the person acquiring the goods or services. Such reverse charge is regulated by national regulation.
According to Article 394 of the VAT directive, Member States which, at 01/01/1977, applied special measures to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance may retain them provided that they have notified the Commission accordingly before 01/01/1978. A specific VAT reverse charge mechanism has been introduced for immovable works in Belgium based on article 394 of the VAT Directive and the standstill provision connected to.
What are the rules in Belgium?
Since 1st of January 2023, according to Belgian law (AR-01,Art. 20, 1992), immovable works including construction, repair, cleaning or maintenance works on an immovable property as well as transaction consisting in incorporating movable goods into immovable property, installation with a building of sanitary, fire, alarm, phone, electrical or air-conditioning equipment, embedded cupboards, stores and shutters, wall or floor-covering provided by a Belgian company are subject to local reverse charge if the recipient is :
- either a taxpayer established in Belgium filing periodical VAT returns,
- either a taxpayer not established in Belgium but VAT registered and filing periodical VAT returns.
Let's take an example
A Belgian company provides construction services to a French company registered for VAT in Belgium. In this case, the domestic VAT reverse charge for construction services is applicable and the Belgian provider issues invoice without VAT.
The model would be different if the French company is not VAT registered in Belgium. In this case, the special VAT reverse charge is not applicable and the Belgian provider should issue invoice with Belgian VAT.
The VAT expert's eye
If a client files special Belgian VAT returns, the latter is required to inform its provider. Otherwise, a specific mention should be indicated on the invoice.
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For partial taxable persons - reverse charge mechanism applies regardless of the capacity in which the partial taxable person acts (i.e. whether for its taxable, non-taxable or both activity/ies).
Belgium Construction VAT: Don't Get Stuck in Reverse Charge Complexity. Let Us Guide You
Navigating Belgium's VAT reverse charge mechanism for construction services can be a challenge, especially with the changes introduced in January 2023. Ensuring compliance requires a deep understanding of the regulations and how they apply to your specific situation.
Our Belgian VAT specialists are here to help you navigate the complexities of the reverse charge and ensure smooth VAT compliance. Here's how we can assist you:
- Reverse charge applicability assessment: We'll analyze your construction activities in Belgium and determine if the reverse charge applies to your transactions, considering your customer's VAT registration status.
- Compliance strategy development: We'll develop a tailored VAT compliance strategy that takes into account the reverse charge mechanism and ensures you meet all your obligations under the new regulations.
- Record-keeping and reporting guidance: We'll provide clear instructions on maintaining accurate records for reverse charge transactions and filing VAT returns accurately.
- Ongoing VAT support: You'll benefit from continuous support and timely updates on any changes to Belgian VAT regulations, including the reverse charge mechanism.
Partner with European VAT Desk and gain peace of mind with your Belgium construction VAT compliance. Contact us today for a free consultation and ensure a smooth journey through the reverse charge system.
We offer a free video conference to assess your situation and provide you with a tailored solution.