Optional reverse charge for non-resident suppliers (art. 194 of the VAT Directive)
The EU VAT system is essentially based on fractionised payments, VAT being collected at each stage of the production and distribution chain after offsetting the input VAT paid on purchases against output VAT received on sales. According to the main rule laid down by Article 193 of VAT Directive, the person liable for the payment of this VAT is the person supplying goods or services. The liable person is the person who is obliged to pay VAT to the Treasury
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 where the transaction is carried out by a supplier who is not established in the country in which VAT is due. Such reverse charge is defined by national regulation.
What are the rules in Belgium?
The generalized reverse charge mechanism has been introduced in Belgium since 2002 and is applicable to all supplies of goods and services that are deemed to take place in Belgium and performed by a taxable person not established in Belgium (i.e. established in another EU Member state or outside the EU) to a customer:
- Established in Belgium and filing periodical Belgian VAT returns or;
- Not established in Belgium but being VAT registered in Belgium and having appointed a fiscal representative.
Under this generalized reverse charge mechanism, the supplier does not have to charge Belgian VAT but his customer will have to account for the Belgian VAT due. However, the regime of generalized reverse charge will not be applicable if the customer is:
- A private individual (not qualifying as a VAT taxable person);
- A taxable person or non-taxable person not filing periodical Belgian VAT returns (but for example filing specific VAT returns);
- A foreign taxable person registered for Belgian VAT without having appointed a fiscal representative (direct registration);
- A foreign taxable person making use of a global VAT number via a fiscal representative.
Let's take an example
A French company purchases goods from a Belgian supplier and resells them to a German company having a Belgian VAT number (direct registration). The goods remain in Belgium. The French company must be registered for VAT purposes in Belgium and charge Belgian VAT to its German client. VAT incurred on the purchase can be recovered through a Belgian VAT return.
The model would be different if the German company was registered in Belgium with a VAT representative. The French company would then not be required to register for VAT purposes in Belgium and should issue an invoice without applying Belgian VAT to its German client. VAT incurred on the purchase would be recovered through the electronic procedure laid down by Directive 2008/9.
Good to know
Belgian VAT authorities are very sensitive to the correct application of the reverse charge mechanism. In case of a VAT audit, they systematically refuse the refund of VAT erroneously charged to the customer and apply fines and late interest if the reverse charge mechanism has not been applied. Contrarily, the authorities will systematically request Belgian VAT, fines and late interest in case the reverse charge mechanism has been erroneously applied.