The VAT exemption for independent groups of persons (hereafter the Group), also referred to as “cost-sharing associations”, may apply for supplies of goods or services rendered by the Group to its members. Several conditions should however be met to benefit from the exemption and are further detailed in Administrative Circular n°31/2016 dd. 12.12.2016. This includes the condition that the fee charged by the Group to its members can only represent the reimbursement of their portion in the common expenses and the fact that each member of the Group cannot perform activities granting a VAT right of deduction of more than 50% of its annual turnover.
The VAT exemption for independent groups of persons is foreseen in article 132 (1) (f) of the EU VAT Directive and has been implemented in Belgium via article 44, §2bis of the Belgian VAT Code. Over the past few years, the conditions to apply the VAT exemption for Groups has been the subject of several discussions which were ultimately decided by the Court of Justice of the European Union (CJEU).
The CJEU ruled in the Aviva case (C-605/15) that this VAT exemption does not apply to services supplied by independent groups of persons whose members carry out an economic activity in the insurance sector. In the DNB Banka case (C-326/15) the CJEU answered in the same way, stating that the VAT exemption also does not apply to the services supplied by an independent group whose members carry out an activity in the financial services industry.
The Kaplan Case (C-77/19) concerned the question whether this VAT exemption could be extended to an independent group of persons in another Member State or outside the European Union. However, the CJEU first examined whether the exemption may apply to supplies of services by an independent group of persons whose members form a VAT group, where those supplies of services are made to that VAT group. The Court concluded that the VAT exemption cannot apply to services received by members of a VAT group if they are not at the same time a member of the independent group of persons. As a consequence, the CJEU did not answer the impact of cross-border circumstances on the VAT exemption, leaving the territorial scope of the VAT exemption therefore uncertain.
The Belgian VAT authorities did not officially react to this jurisprudence despite the fact that the application of the exemption for the banking, financial and insurance sector was questioned by the CJEU.
On 20 May 2021, a draft Law was adopted amending article 44, §2bis of the Belgian VAT Code hereby limiting the scope of the exemption to the social sector (healthcare, cultural sector etc.). This means that the exemption can no longer apply anymore in the banking, financial and insurance sector. The draft Law does not tackle the territorial scope of the exemption.
It should be noted that this change will have no retro-active effect. For independent groups of persons established before 1 July 2021 and for the members already included in the Group on that date, the Law will enter into force as of 1 January 2022, leaving operators sufficient time to unwind their current set-up and consider alternatives like VAT grouping.
We would be happy to discuss this in further detail if of interest for your business.
- Belgium restricts the application of the VAT exemption for independent Groups of Person in accordance with established CJEU jurisprudence.
- Operators from the financial sector will no longer benefit from the exemption.
- New rules will be effective as from 1 January 2022 leaving operators the chance to unwind their current set-up and consider alternatives.