Updated May 2021
These measures may have (sometimes unexpected) tax consequences. Below, we cover various tax related questions that taxpayers may have.
In order to mitigate the financial impact for these companies, the Flemish Government announced that businesses in the Flemish region can request a compensation. Businesses which were mandatorily closed entirely were initially entitled to a lump-sum compensation of €4,000 while businesses which could remain open on weekdays were entitled to a compensation of €2,000. Companies that are still required to remain closed after 4 April 2020, are entitled to an additional compensation of €160 per day. A compensation of EUR 2,000 is also foreseen for businesses that do not need to close but that can demonstrate that the turnover has decreased with at least 60% in a period of one month as of the reopening compared to a reference period last year. Funds are also made available in the Walloon and Brussels region for similar measures. The compensations granted in the framework of aid measures taken by the regions, communities, provinces and municipalities are, under certain conditions, exempt from taxes. This tax exemption applies until 31 December 2021. Compensations that were previously treated tax exempt but are reimbursed to the respective region shall not be considered a tax-deductible expense.
Deferred payment of taxes
At the beginning of the coronavirus in 2020, the Belgian government took various measures to defer the payment date for corporate income tax, personal income tax, legal entities tax, wage withholding taxes and, VAT and certain excise duties. At present, no similar measures have been announced for 2021.
Companies facing financial difficulties as a direct result of the Corona virus pandemic, regardless of their activity or sector, can however still request a number of tax and social security support measures from the Federal Tax Authorities, which should allow companies to bridge these temporary financial difficulties.
All Belgian registered businesses (both companies and self-employed individuals) are entitled to these measures if it can be shown that they have incurred nuisance from the spreading of the Corona virus and the correlating measures, which can be either direct (e.g. significant decrease in turnover) or indirect (as a consequence of a chain-reaction, e.g. partner companies suspending business). Companies which are in structural financial distress (i.e. companies already facing financial difficulties prior to the Corona outbreak in Belgium) can in principle not benefit from these measures.
The support measures consist of (i) a further deferral of payment, (ii) a waiver of late payment interest and (iii) a waiver of late payment fines. These measures can be requested for VAT, wage withholding tax, corporate income tax, personal income tax and legal entities tax. A company can request to apply (one or more of) these measures using a form specifically issued for this purpose and should submit a separate request for each individual debt. The form can be found on the website of the Federal Tax Authorities here. In principle, a request can only be lodged after the receipt of an assessment notice or a request for payment. Application of these measures has been extended to 30 June 2021.
It should be noted that these supportive measures are conditional upon the timely, correct and complete filing of the relevant tax return. Hence, it is of utmost importance that the relevant tax formalities (e.g. VAT return, income tax return) are duly and timely complied with. In this respect, the Tax Authorities have announced a general extension of the filing deadline. Reference is made to question 3 below.
Deferred prepayment of taxes
If self-employed persons and companies are in a tax paying position and do not make timely prepayments of income taxes, a tax increase will be imposed. Each quarter a prepayment can be made and each prepayment leads to a tax credit which reduces the tax increase suffered if no prepayments would have been made. A prepayment made in the first quarter results in a higher tax credit than a prepayment made in a later quarter. Many self-employed persons and companies are currently facing liquidity problems due to the corona crisis and can therefore not make prepayments. In order to avoid that they are being penalized if they only prepay the taxes later this year, the tax credits for the last two quarters of 2020 are increased.
The measure shall apply to prepayments relating to a taxable period ending between 30 September 2020 and 31 January 2021 included.
For companies, the tax credit for prepayments of corporate income taxes increases in the third quarter from 6% to 6.75% and in the fourth quarter from 4.5% to 5.25%.
For the self-employed persons, the tax credit for prepayments of personal income tax increases from 2% to 2.25% in the third quarter and from 1.5% to 1.75% in the fourth quarter.
This measure does not apply to:
- companies that repurchase own shares, make a capital reduction or attribute/pay dividends between 12 March and the end of the relevant period;
- companies that pay a variable remuneration between 12 March 2020 and the end of the relevant period to the main representative of the executive directors, to the chairman of the executive board, to the main representative of the other persons in charge of the management or to the main representative of the persons in charge of the daily management.
- taxpayers that hold a direct participation between 12 March 2020 and the end of the relevant period in companies that are established in certain tax haven countries;
- taxpayers that pay amounts of € 100,000 or more between 12 March 2020 and the end of the relevant period to companies established in certain tax haven countries if it is not demonstrated that these payments were made in the context of an actual and genuine transaction
Abolition December advance payment for VAT and wage withholding tax
VAT taxable persons filing periodical VAT returns (i.e. monthly or quarterly VAT returns) are no longer required anymore to pay the advance payment of the VAT normally due for the month December or for the last quarter in December of that year. As a result, the VAT due on the transactions carried out in December respectively Q4 of a given year shall only have to be paid to the Belgian State by the 20th of January of the following year. The December advance payment has equally been abolished for the wage withholding tax.
In addition to the above, various measures are also announced at the regional levels.
The Flemish Government has for example announced that the payment of the immovable property tax (onroerende voorheffing / précompte immobilier) for 2020 is deferred for approximately four months (i.e. until 30 April 2021) for companies active in the Flemish Region. No late payment interest will be charged for that period. The deferral is granted automatically and companies may disregard the payment term of 31 December 2020 mentioned on the assessment notice. Self-employed persons can flexibly request a payment plan and, if necessary, a waiver of interest on late payments.
For some additional measures regarding the payment of registration duties, reference is made to the section ‘Filing deadlines postponed’ below.
Following the federal decisions to prevent the coronavirus, cities and municipalities also provide support measures for the self-employed and entrepreneurs affected. A compilation of a.o. the fiscal measures of the Flemish cities and municipalities can be found on the website of VVSG here. However, it is recommended to have a look at the website of your municipality.
In 2020 the Belgian tax authorities allowed various extensions for the filing deadline of tax returns, VAT returns, IC sales listings, annual client listing and CRS and FATCA reporting. It remains to be seen whether similar administrative tolerances will be granted in 2021. For VAT related filings, there are currently no extensions foreseen for 2021.
Due to the security measures in place in Belgium in relation to the second wave of the coronavirus (as of 1 November 2020), notary offices and citizens are not always able to complete all (tax) formalities on time. The Flemish Tax Administration therefore provides, as a general measure, an extension of the deadline until 30 April 2021 if the deadline would normally expire between 1 November 2020 and 30 April 2021. It is not necessary to apply for this postponement.
This implies that:
- no tax increase for a late inheritance tax return will be imposed if this tax return is filed no later than 30 April 2021. If, for example, an inheritance tax return should have been filed by 28 November 2020 at the latest, this deadline is now extended to 30 April 2021.
- no tax increase will be imposed if the period within which a deed must be submitted for registration is exceeded. If, for example, two parties agree to sell an immovable property and this sale should be registered by authentic deed on 28 November 2020, this deadline is now extended to 30 April 2021. In addition, the period of time to comply with the conditions to maintain a favourable regime is extended until 30 April 2021 as well. This also implies that the payment of the registration duties can be postponed to the same extent.
In the Walloon and Brussels region, the Tax Administration announced that the deadline for submitting an inheritance tax return (and consequently for paying the inheritance taxes) is temporarily suspended for a period not exceeding four months, provided that it expires between 1 November 2020 and 31 January 2021. In both regions, the term of payment of one month for certain registration duties, and, if applicable, for the fines, is extended for a period of four months, provided that this term expires in the period from 1 November 2020 to 31 January 2021. For more information, reference can be made to circular letter 2020/C/138 which can be found here.
The corona crisis may raise concerns about a potential change in the “place of effective management” of a company as a result of the COVID-19 measures taken by governments, such as travel restrictions. Such change may impact the company’s residence status under the relevant domestic laws and also affect the country where a company is regarded as a resident for tax treaty purposes. For an overview of the OECD analysis as well as the perspective of our home markets – Belgium, Luxembourg, Netherlands and Switzerland – on corporate tax residence and substance, we refer to our flash.
Although income from employment is generally taxable in one’s “home” state, employees which are active in a cross-border context (e.g. Dutch residents working in Belgium or vice-versa) are often taxed in the country in which they are economically active (the “work” state), provided that a minimum amount of the (professional) time is effectively spent in that country (specific conditions apply depending on the country in question).
Considering the general advice of the Belgian (and foreign) authorities to telework to the largest extent possible, the period spent in the work state by these employees could significantly decrease, which could potentially limit the work state’s right to tax the professional income, or even entirely shift this right to tax to the home state of the employee concerned. It is thus very important to keep record of the days that the employee(s) concerned have worked from their home office, in order to assess any changes to the applicable tax regime.
Specific agreements have been made regarding employees commuting between Belgium on the one hand, and Germany, France, Luxembourg or the Netherlands on the other hand.
Belgium and the Netherlands have agreed that - for the purposes of the application of article 15, § 1 of the double tax treaty concluded between Belgium and the Netherlands - working days for which remuneration was received and on which the employee worked at home solely because of measures taken by the Dutch or Belgian government to fight the COVID-19 pandemic, are deemed to be spent in the Contracting State in which the employee would be employed without these measures. This fiction cannot be applied to working days which, independently of these measures, the employee would have spent at home or in a third state. In particular, it cannot be applied by employees who, in accordance with their employment contract, generally exercise their employment from home. Employees who use the fiction are obliged to apply it in a consistent manner in both Contracting States and to maintain evidence (e.g. a written confirmation from the employer with respect to the days that an employee has been working at home due to the COVID-19 measures). This fiction can only be applied to the extent that the salaries for the days that were spent working at home are effectively taxed by the normal work state. The agreement is effective as of 11 March 2020 until 30 June 2021. The agreement also contains provisions with respect to payments that an employee receives during a temporary unemployment.
On 6 May 2020, a similar fiction is agreed upon between Belgium and Germany concerning article 15, § 1 of the Belgian-German double tax treaty for the days that an employee is working at home as a result of the COVID-19 measures taken by the Belgian and German Governments. Similar conditions apply. The agreement applies until 30 June 2021.
Article 11, § 1 of the Belgian-French double tax treaty provides that salaries, wages and other similar remuneration are taxable only in the Contracting State on whose territory the personal activity, which is the source of such income, is exercised. On the basis of the rules on frontier workers laid down in the additional Protocol to this double tax treaty, the salaries, wages and other similar remuneration of a French employee working in the Belgian frontier zone are in principle taxable in France (i.e. the State of residence) if the employee has a permanent home exclusively in the frontier zone of France. However, there are several conditions that have to be met. One of the conditions is that the French frontier worker must not leave the Belgian frontier zone for more than 30 days per calendar year in the physical exercise of his/her activity. Article 7(b) of the Protocol contains a list of cases which are not taken into account for the application of this 30-day rule, including cases of force majeure beyond the control of the employer and the employee. Already on 13 March, the Belgian and French authorities agreed that the COVID-19 situation will be such a case of force majeure as of 14 March 2020. As a result, the presence of a French frontier worker in his place of residence in France (in particular to telework there) will not be taken into account for the calculation of the 30-day period. The measure applies until 30 June 2021. This agreement concerns only the French frontier worker, but does not provide a solution for other employees working from home. That is why Belgium and France also agreed on 15 May 2020 to give all other employees resident in a Contracting State who habitually carry out their activity (full-time or part-time) in the other State the possibility of using the same fiction as mentioned above (under similar conditions). This possibility applies from 14 March 2020 until 30 June 2021.
Employees commuting between Belgium and Luxembourg are taxable on their professional income in the work state if any professional activity physically carried on outside this work state is limited to a period of maximum 24 days, unless force majeure can be shown. In light of the current limitations on travel, the Belgian and Luxembourg authorities have expressed their intention to qualify the present situation as such force majeure: the period spent by the employee in his home state for the purpose of teleworking, will not be considered for the calculation of the aforementioned 24-day limitation. This measure is effective as of 14 March 2020 and applies until further notice. In addition, an agreement has been reached on 19 May 2020 between Belgium and Luxembourg that is similar to the agreement that Belgium concluded with the Netherlands, Germany and France for other employees that work cross-border. The agreement applies from 11 March 2020 to 30 June 2021.
On 17 June 2020, the Belgian tax authorities published a FAQ on the impact of corona on cross-border employment which can be viewed here. According to the FAQ, home working days due to the pandemic are not disregarded for employees residing in Belgium and generally working in another country than France, Germany, Luxembourg or the Netherlands. Hence, the former country of work may not keep its taxation right.
Employers could be faced with unexpected tax implications as a consequence of (longer periods of) teleworking. Indeed, if the employee’s home office in another country would be available to the employer with a certain degree of permanence (the so-called “fixed place of business”), and the employee is exercising the activities of the company through that home office, it could constitute a permanent establishment of the employer. However, in order to qualify as a permanent establishment, the employer should have the employees’ home office at its disposal, meaning that it is able to organize its business activities from this location (the so-called material permanent establishment).
It should be reiterated that an employee’s home office does not automatically qualify as a” fixed place of business”’, since such home office is often not “at the disposal” of the company. Whether or not a home office constitutes a location that is at the disposal of the company depends on the factual circumstances, whereby a number of hallmarks are generally considered, such as the address of the home office which is identified as the address of the company, the continuous use of the home office for business purposes, access of the employer or specific reimbursement of expenses for the use of the home office (note that this list is not exhaustive). The place of business should also have a certain degree of permanence to be considered “fixed”.
In addition to the material permanent establishment, a so-called agency permanent establishment can be equally recognized if the employee of a foreign-based company is working from home and in his/her regular course of business habitually concludes contracts on behalf of the employer, in relation to its core business (or playing the principal role in the conclusion thereof).
On 3 April 2020, the OECD Secretariat issued guidance on the consequences of the corona crisis for international tax treaty rules, which was updated on 21 January 2021. The OECD Secretariat concludes that the exceptional and temporary change of the location where employees exercise their employment because of the corona virus should not create a new permanent establishment for the employer. No material permanent establishment is being created (to the extent teleworking does not become the new norm over time) either because working from home lacks a sufficient degree of permanence or because the employer does not have control over the home office. Similarly, no agency permanent establishment is being created if the employee is temporary concluding contracts in his/her home country due to the corona crisis as the activities performed in the home country are only transitory. The conclusion might be different though if the employee was already habitually concluding contracts on behalf of the enterprise in his/her home country prior to the corona crisis. The OECD Secretariat notes however that the threshold presence required by national law to register for corporate income tax purposes may be lower than those applicable under tax treaty rules. Although these exceptional circumstances preclude employees to work according to their regular schedules or from their regular places of business, the Belgian Tax Authorities have not issued any guidance yet in this respect.
If you have obtained a tax ruling in the past confirming that the home office of a Belgian employee does not constitute a permanent establishment in Belgium on the condition that the employees’ activities are carried out from the home office only 1 or 2 days per week, we suggest to contact the ruling commission in view of confirming that the validity of the ruling is not affected.
Due to the measures taken in the fight against the coronavirus, the Ruling Commission has been willing to provide a ruling confirming that the employer can temporarily give its employees, regardless of their job category, a tax-free allowance of up to EUR 126,94 per month to cover the costs caused by teleworking, such as heating, electricity, paper,...
On 14 July 2020, the Belgian tax administration issued a circular letter allowing, under certain conditions, such a tax-free allowance in case of regular and structural homeworking carried out by employees, even without a ruling. If employees work at home for at least 5 working days per month, the employer may grant a lump-sum homeworking allowance of up to EUR 126.94 per month. As a result of indexation, this amount will increase to 129.48 euros per month from 1 April 2020. On 2 March 2021 the tax administration issued a new circular letter for employees who work at home which transcends the issue of home working in the context of the COVID-19 and which replaces the previous one. The circular letter foresees on the one hand a fixed office allowance covering various office expenses for a maximum of EUR 129.48 per month (to be increased to EUR 144.31 for the months of April, May and June 2021) and on the other hand a reimbursement of the purchase price of office furniture/computer equipment. For more information reference can be made to our newsletter.
With effect from 1 January 2019, Belgium introduced a new interest limitation rule in line with the Anti-Tax Avoidance (ATAD). According to this rule, any “exceeding borrowing costs” are only tax deductible up to the maximum of 30% of the taxpayer’s EBITDA or EUR 3 million. A Grandfathering was introduced for existing loans: loans that are concluded prior to 17 June 2016 are excluded from this rule if no essential changes have been made on or after this date. Essential changes include a.o. a change in the parties, the interest rate, the duration or the amount borrowed.
The exceptional situation caused by Covid-19 and the measures imposed in that respect by the federal government will inevitably have an adverse effect on the liquidity and solvency of some companies. In this context, specific payment methods (e.g. a deferral of interest or capital payment) may be authorised for certain loans. A circular letter clarifies that the authorisation of specific payment arrangements for loans concluded before 17 June 2016 should not be considered as a fundamental change when:
- the taxpayer can demonstrate that the payment problems are the result of the crisis caused by COVID-19, and
- the terms of payment appear in an approved application to a financial institution or are included in a supplementary agreement.
In other words, these loans will be able to continue to benefit from the grandfathering rule.
These payment problems, which are the result of a general liquidity and solvency problem, may be reflected in particular in a fall in turnover or activity, temporary or total unemployment among staff or temporary closure as a result of the measures imposed by the federal government as part of the fight against COVID-19.
In principle, tax losses can only be carried forward and no carry-back to previous tax years exist in Belgium. However, in order to improve the cash position of businesses and companies, a one-time possibility is introduced to carry-back the losses incurred during the COVID-19 crisis to compensate the taxable profits of the previous financial year.
The loss incurred in the COVID-19 year should be estimated prudently as an over-estimation will result in a (non-tax deductible) tax increase (personal income tax) or in a (non-tax deductible) separate assessment (corporate income tax) becoming due.
Self-employed persons and businesses subject to personal income tax are allowed to carry back the loss expected in income year 2020 due to the corona crisis to income year 2019. The loss-carry back takes the form of an ‘economic exemption’ which needs to be claimed through a separate form since tax return form has ready been published in the Belgian Gazette. The exemption cannot result in a negative outcome. The amount that has been exempt is added to the taxable basis in 2020 (assessment year 2021) in order to avoid a double deduction of the same loss.
The following taxpayers are excluded from this rule:
- Enterprises that were already in difficulties according to art 2, §1, 4/2 when corona started (i.e. on 18 March);
- Taxpayers that are taxed on lump sum taxable basis.
More information regarding the formalities to be fulfilled can be found here.
Companies will be able to off-set the estimated loss incurred in the subsequent (i.e. the COVID-19) year from the taxable profit realised during a financial year closing between 13 March 2019 and 31 July 2020. Technically, the taxable reserves in the corporate income tax return are reduced for the amount of the estimated loss through the creation of a tax exempt reserve. The exemption cannot be higher than the adjusted result of the taxable period with an absolute max of 20mio€.
The amount that has been exempt is added to the taxable basis (through an increase of the taxable reserve) in the subsequent COVID-19 year in order to avoid a double deduction of the same loss. In addition, the taxable basis will be increased (through a disallowed expense) if the amount of the exemption is taxed in a subsequent year at a lower tax rate than the rate applicable at the moment the estimated loss was used to off-set the taxable basis. This measure was introduced in order to neutralize the benefit of this lower tax rate.
The following companies are excluded from the rule:
- Companies that distribute a dividend, repurchase own shares or perform a capital (or similar) reduction between 12 March 2020 up to and including the filing of the CIT return in relation to assessment year 2021;
- Companies subject to a special tax regime;
- Companies that hold a direct participation between 12 March 2020 up and including the filing date of the CIT return in relation to assessment year 2021 in a company established in certain tax haven countries;
- Companies that pay amounts € 100,000 or more between 12 March 2020 up and including the filing date of the CIT return in relation to assessment year 2021 to companies established in certain tax haven countries if it is not demonstrated that these payments were made in the context of an actual and genuine transaction;
- Companies that were already in difficulties according to art 2, §1, 4/2 when corona started (i.e. on 18 March).
Companies are allowed to exempt part of their profits realised in assessment years 2022, 2023 and 2024 by booking these profits to an exempt "reconstruction reserve" for the purpose of strengthening their solvency which was affected by the COVID-19 crisis. This reconstruction reserve thus allows future profits to be treated in a fiscally advantageous manner, provided a loss was incurred in 2020 and certain other conditions are fulfilled.
The measure does not apply to:
- Companies that distribute a dividend, repurchase own shares or perform a capital (or similar) reduction between 12 March 2020 up to and including the filing of the CIT return in relation to the assessment year in which the reconstruction reserve was accounted for;
- Certain companies subject to a special tax regime;
- Companies that were already in difficulties according to art 2, §1, 4/2 when corona started (i.e. on 18 March).
The reconstruction reserve only remains tax exempt to the extent that:
- the reconstruction reserve is accounted for and maintained in a separate reserve account;
- The company does not hold a direct participation in a company established in certain tax haven countries between 12 March 2020 up and including the last day of the taxable period in which the reconstruction reserve is benefitted from;
- The company does not pay amounts of € 100,000 or more to companies established in certain tax haven countries between 12 March 2020 up and including the last day of the taxable period in which the reconstruction reserve is benefitted from (unless it is not demonstrated that these payments were made in the context of an actual and genuine transaction);
- Equity and employment are maintained.
A landlord who grants a (partial) remission of rent to his tenant may enjoy a tax advantage if amongst others the following conditions are met:
- at least 40 % of the rent for the months March, April and May 2021 is waived;
- the tenant is a self-employed person (in the main profession), a small company or a small association; and
- the tenant had to close its business due to the measures imposed by the federal government as a result of the covid-19 pandemic.
If the conditions are fulfilled, a tax reduction of 30% of the remitted rent can be claimed. A maximum of €5,000 per month per lease can qualify for the tax reduction and a maximum of €45,000 per landlord. For corporate income tax purposes, the benefit is granted in the form of a non-refundable tax credit.
The waiver must be laid down in a written agreement between the tenant and the landlord. The tax administration has provided a model agreement that can be consulted here. The agreement should be sent to the tax administration on 15 June 2021 at the latest.
The question can be raised whether such remittance can qualify as an abnormal or benevolent advantage. The Minister of Finance confirmed in a Parliamentary Question that no advantageous or benevolent advantage is present in case the rent is partially or wholly remitted because a taxpayer is forced to close its business due to the pandemic. Whether the cost associated with the remittance is tax deductible for the landlord depends on the circumstances. However, if the landlord remits the rent in order to obtain or maintain taxable income, a condition that is in principle fulfilled according to the Minister, this cost can be considered tax deductible.
In accordance with Belgian VAT law, an advance payment triggers VAT becoming due. If the intended transaction afterwards does not take place (e.g. the agreement is cancelled by the customer or following a government corona prevention measure), a refund of the VAT on the advance payment could be requested.
Please also take into account that an actual VAT refund claim ultimately depends on the provisions of your contract with your customer.
In the event a contract is terminated by the customer before the actual supply of goods or services, a refund of the VAT could be requested in accordance with the Belgian VAT Code. Such a VAT refund claim does of course require that the VAT has already been (partially) paid by your company before the cancellation/termination of the contract.
Again, take into account that an actual VAT refund claim ultimately depends on the provisions of your contract with your customer.
The retention by your business of the advance payment made by your customer following the cancellation/termination of the transaction/contract is not subject to VAT. Since such retention is to be considered as solely indemnifying your business for any damage incurred as a result of the cancellation/termination of the transaction/contract, no VAT is due.
The VAT that would already have been paid to the Belgian State on the advance payment could be recovered up to the amount of the advance payment that would be retained (and is agreed upon) as cancellation/termination fee.
In the event that the price would remain (partially) unpaid after the goods or services were supplied and the underlying contract itself would not be annulled, your business could request for a refund of the VAT paid to the Belgian State in relation to the totally or partially lost claim/debt.
Such refund would in principle require that your company can prove that the claim/debt has remained unpaid - despite having used all possible means to obtain payment of the claim/debt – and that therefore the loss of the claim/debt is certain and indisputable. The question whether a claim/debt could be considered as ‘certain and indisputable’ depends on the circumstances and facts of each case. For example, in the event that the claim/debt would have been lost for reason that the customer has become bankrupt, such claim/debt would be considered as ‘lost and indisputable’ (and thus a refund could be requested) at the date of the judgment pronouncing the bankruptcy of the customer.
The Belgian Government has asked all Belgian civilians and companies to donate their medical material and supplies to hospitals, in order to cover possible shortages.
In this respect one should know that taxable persons who deducted VAT on the manufacturing or purchase of items donated for free are in principle obliged to adjust the deducted VAT via a self-supply subject to VAT. This additional VAT cost could discourage companies from donating medical supplies.
For this reason, the Belgian VAT authorities have now decided that a donation of medical supplies to hospitals will not lead to a VAT adjustment. This measure will apply to supplies made since 1 March 2020 up until 1 September 2020.
The aforementioned tolerance applies to the following goods:
- Medical devices as referred to in Royal Decree 18 March 1999 (e.g. instruments intended for diagnostic and therapeutic purposes, devices intended for clinical research, …)
- Protective equipment for healthcare workers and patients (mouth mask, protective clothing, disinfectants, …)
Please note that the measure does not apply to the donation of pharmaceutical drugs.
The medical supplies must be donated to one of the following institutions:
- Healthcare institutions as referred to in the coordinated law of 10 July 2008. Pursuant to this law, hospitals must meet certain standards and must be approved / recognized by the FPS Public Health (this concerns in particular those institutions whose medical care services normally fall within the scope of the exemption envisaged by Article 44, § 2, 1°, a) of the VAT Code);
- Associations of hospitals as referred to in Royal Decree 25 July 1997;
- Hospital groups as referred to in Royal Decree 30 January 1989;
- Mergers of hospitals as referred to in Royal Decree 31 May 1989;
- Locoregional clinical hospital networks as referred to in the law of 28 February 2019;
- Certain institutions mentioned under article 44, §2, 2° of the Belgian VAT Code:
- Retirement homes
- Homes for people with a disability
- Schools and universities
- Humanitarian aid organizations (for their interventions relating to COVID-19)
- Approved institutions referred to in Regulation 2020/491
- Other government institutions
In order to benefit from this VAT measure, the company should be able to provide proof that the medical supplies were donated free of charge to one of the institutions mentioned above. The proof must consist of a document in which the hospital confirms that the donated medical supplies were used to provide care or were donated to another institution.
In addition, this document must be drawn up in twofold for each donation, dated and signed by both parties and should contain the following details:
- Name, address and VAT number of the benefactor;
- Name, address and company number of the beneficiary;
- Complete description of the donated goods; and
- Amount of goods.
This document replaces the document required by article 3 of Royal Decree n° 1, which establishes that business assets were used for other purposes than the economic activity by the benefactor.
It should also be noted that the following guidelines apply for the aforementioned document:
- Multiple donations can be merged by mentioning the different types of medical supplies and their amount. The benefactor can even replace the complete description of the donated goods by attaching the original receipt for the medical supplies to the document.
- One summarizing document / overview containing all the donations of one month will also be accepted by the VAT authorities, if the summarizing document is drawn up before the 15th day of the following month and reference is made to the month in which the medical supplies were actually donated.
- It is not required to register this document in the accounts of the benefactor, but it should be kept in case of VAT-audit.
In order to mitigate shortages of computers in Belgian schools, a similar measure was adopted to stimulate the donation of computers to schools established in Belgium. The same documents are required as for donations of medical supplies. This measure will apply for supplies made since 1 March 2020 up until 31 December 2020.
Income Tax Consequences
If the donator is subject to corporate income taxes (resident and non-residents) or is subject to personal income tax (residents/non-residents) as a self-employed person, the donation of the above mentioned medical goods done between 1 March 2020 and 31 July 2020 will not qualify as an abnormal or benevolent advantage and the costs associated with the donated medical goods will be tax deductible. A similar measure is introduced for donations of computers to schools established in Belgium between 1 March 2020 and 31 December 2020.
Please note that other natural persons subject to personal income tax (resident/non-resident) that donate these medical goods and computers to certain institutions can exceptionally and temporarily receive an increased tax deduction.
In order to stimulate the supply of goods which are required to comply with the preventive measures in the fight against the COVID-19 pandemic, the Federal Government has decided to temporarily apply the reduced VAT rate of 6% (instead of the standard VAT rate of 21%) on the supply, intra-Community acquisition and import of:
- face masks, classified under the CN codes 4818 90 10 00, 4818 90 90 00, 6307 90 98 10, 6307 90 98 91, 6307 90 98 99 and 9020 00 00 10. As from 1 January 2021 the combined customs nomenclature has changed with an impact on the classification of face masks. As from this moment, this measure applies to face masks classified under the following CN codes: 4818 9010 00, 4818 9090 00, 6307 9010 00, 6307 9093 11, 6307 9093 19, 6307 9093 20, 6307 9093 90, 6307 9095 11, 6307 9095 19, 6307 9095 20, 6307 9095 91, 6307 9095 95 and 9020 0010 90, and
- hydro alcoholic gels classified under the CN codes 2207 20 00, 3808 94 10, 3808 94 20 and 3808 94 90.
This measure will apply as from 4 May 2020 until 31 December 2020. This period has further been extended, and accordingly will also apply to all supplies, intra-Community acquisitions and imports of the abovementioned goods for which VAT becomes due as from 1 January 2021 until 30 June 2021 (see Circular letter no. 2021/C/6 of 18 January 2021).
This national measure complements the European Commission’s decision – in the fight against COVID-19 – to temporarily waive customs duties and VAT for State bodies and charitable organizations when importing medical devices and protective equipment from third countries.
The Council has adopted amendments to the VAT Directive to allow EU Member States to temporarily exempt COVID-19 vaccines and testing kits, as well as closely related services, from VAT when sold to hospitals, medical practitioners and individuals.
This measure only concerns COVID-19 vaccines which have been authorized by the Commission or by the EU Member States and COVID-19 testing kits that comply with the applicable EU legislation.
The measure will apply until 31 December 2022.
EU Member States may also apply a reduced VAT rate to testing kits and closely related services, if they choose to do so (instead of a zero rate). This possibility was already available for vaccines.
The Belgian Minister of Finance has in this respect decided that COVID-19 vaccines and in vitro diagnostic medical devices for this disease are subject to a 0% VAT rate. This measure applies as from 1 January 2021 until 31 December 2022.
The supply, intra-Community acquisition and import of the following goods is subject to the 0% VAT rate (see Circular letter no. 2021/C/3 of 11 January 2021):
- COVID-19 vaccines that have been granted a European market authorization and are registered as medicines by the Minister of Public Health, and
- Diagnostic tests for this disease, such as PCR tests (nucleic acid test) and antigen tests via a sample taken from the nose, serological tests via blood sampling and (antibody) self-testing. The diagnostic tests must meet the requirements of the EU in the field of medical devices for in vitro diagnostics (see a.o. Directive 98/79/EC of the European Parliament and of the Council of 27 October 1998 on in vitro diagnostic medical devices and Regulation 2017/745 of the European Parliament and of the Council of 5 April 2017 on medical devices, amending Directive 2001/83/EC, Regulation (EC) No 178/2002 and Regulation (EC) No 1223/2009 and repealing Council Directives 90/385/EEC and 93/42/EEC).
This 0% VAT rate also applies to services which are closely linked to the aforementioned vaccines and medical devices (e.g. taking the test, analysis of the test at the assigned lab, administering a vaccine). This means that no VAT shall be due on the services of medical, paramedical, pharmaceutical and support staff in the vaccination centers.
The Minister of Finance has also decided that the provision of personnel by a city, municipality or CPAS to a first-line zone in the context of the organization and operation of vaccination centers can also take place under the 0% VAT rate (and so that no VAT would be due).
Due to the exceptional situation created by the Covid-19 lockdown and mandatory teleworking, the semi-flat rate (semi-forfaitaire) calculation method for the deduction of input VAT on costs relating to cars which are used for both private and professional purposes (calculation method 2) is distorted.
Therefore, the VAT authorities allow taxable persons who normally apply calculation method 2 to deduct input VAT on the basis of the general flat rate of 35% (calculation method 3). Taxable persons can also combine calculation method 2 and calculation method 3 for multiple cars, despite this in principle being prohibited. The other application conditions for methods 2 and 3 remain of course in place.
It is important to note that these measures only apply to calendar year 2020.
As of 2021, the taxable persons concerned (who applied calculation method 3 or a combo of calculation method 2 and 3) can again switch to calculation method 2.
As a one-off support measure for businesses, the interest on the late payment of VAT debts is reduced to 4% per year (instead of 9,6%) during the second quarter of 2021 (i.e. 1 April until 30 June 2021). In addition, the proportional fine for the late payment of VAT is reduced from 15% to 10% (of the VAT due) during the same period (i.e. Q2 of 2021).
In order to mitigate potential liquidity issues for taxable persons as a result of the Covid-19 restrictions, the thresholds for the refund of deductible VAT amounts exceeding the VAT amount due as shown in the periodic VAT returns, have been reduced. Contrary to other VAT related Covid-19 relief measures (excl. the abolishment of the December advance payment), this measure is permanent and has entered into force on 1 April 2021.
The reduced refund thresholds apply to all taxable persons with a right to deduct input VAT who file monthly or quarterly VAT returns. In addition to reaching the new threshold, the VAT return must in any case be submitted by the 20th of the month following the period to which the VAT return relates and the box ‘refund request’ should be ticked in the VAT return concerned in order to get a reimbursement of the outstanding VAT credit.
The new VAT refund thresholds are:
- EUR 50 (instead of EUR 245) if the VAT refund is requested in the VAT return relating to the last month or quarter of the calendar year;
- EUR 400 (instead of EUR 615) if the VAT refund is requested in the VAT return relating to one of the first three quarters (of the calendar year) by a taxable person who files quarterly VAT returns;
- EUR 400 (instead of EUR 1.485) if the VAT refund is requested in the last monthly VAT return of one of the first three quarters (of the calendar year) by a taxable person who files monthly VAT returns;
- EUR 50 (instead of EUR 245) if the VAT refund is requested by a taxable person filing monthly VAT returns and holding an authorization for monthly refund of its VAT credit; or
- EUR 50 (instead of EUR 245) if the VAT refund is requested by the taxable person-starter (i.e. within 24 month as from the date on which he commenced its activity) filing monthly VAT returns.
As most hotels, restaurants and bars were closed since October 2020, the VAT rate for certain restaurant and catering services has been reduced to 6%.
The reduced VAT rate specifically applies to all services whereby foods and/or drinks (incl. alcoholic beverages) are provided to customers for on-site consumption. This includes regular bars and restaurants (including bars and restaurants in hotels, offices or sport clubs), food trucks and caterers.
The reduced VAT rate is applicable for all restaurant and catering services for which VAT becomes due from 8 May until 30 September 2021.
Natalie ReypensPartner Attorney at Law
Natalie Reypens is a member of the Loyens & Loeff International Tax Services Practice Group and heads the Belgian Transfer Pricing Team. She is a partner in our Brussels office. She focuses on corporate and international tax law.T: +32 2 743 43 37 E: email@example.com
Bert GeversPartner Attorney at Law
Bert Gevers is a local partner in our Brussels office. He heads the Loyens & Loeff Indirect Tax Practice Group in Belgium, is a core member of the Corporate Investigations Team and co-heads the Food and Beverages Team.T: +32 2 743 43 18 E: firstname.lastname@example.org
Benno DaemenAssociate Attorney at law
Benno Daemen, attorney at law, is a member of the Loyens & Loeff International Tax Services Practice Group in Belgium. He is an associate in our office in Brussels and specialises in corporate income tax and international tax law.T: +32 2 773 23 67 E: email@example.com
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