Background
Mixed taxpayers can only reclaim a portion of the VAT on their expenses. Essentially, they need to determine their VAT deduction using a "pro rata" method, which is calculated as a ratio between the turnover from taxable transactions generating VAT deduction and the total turnover (Article 46, § 1 of the VAT Act).
Alternatively, they can exercise their right to deduction based on the actual use of goods and services. Until recently, this required a "license." However, starting from 2023, mixed VAT taxpayers who wish to apply the actual use method only need to submit a (prior) "notification" (Article 46, § 2 of the VAT Act). The notification should be submitted through the electronic forms for initiating or modifying activities via the MyMinfin application (forms e604 A or B).
Deadline: June 29th or June 30th, 2023?
Taxpayers who have been applying the actual use method before December 31, 2022, and wish to continue doing so must notify their VAT office before July 1, 2023 (Article 18bis, § 7 RD no.). However, the legislation (Article 46§2 of the VAT Act) mentions a different deadline, namely a mandatory notification before June 30, 2023. Since the tax authorities consistently refer to "before July 1, 2023" or "no later than June 30, 2023" in other reports, one could conclude that the “June 29, 2023” deadline is an error in the drafting of the new Article 46§2 of the VAT Act.
To make this notification, taxpayers need to complete the "Actual Use" section of Form e604B, indicating the start date of actual use. Previously, there was an IT bug that prevented this notification, but it has been resolved. If any issues arise, taxpayers can contact the local VAT control (“dienst beheer”) or send a message to autbtwtva.604@minfin.fed.be.
Administrative clarification
We are still awaiting a circular that provides further clarification on specific cases that may or may not require a mandatory notification to the tax authorities. One question that arises is whether a mandatory notification also applies to a taxpayer engaged in exempt activities that can be excluded from the calculation of the general pro rata, because these do not concern a specific economic activity and would otherwise distort the calculation of the pro rata (Article 13 RD No. 3). Consider, for example, a fully taxable person who rents out an apartment exempt from VAT. While we expect that this is not the case, it would be helpful to have this confirmed.
Reporting additional data : postponed until 2024
In addition to the notification, mixed VAT taxpayers must periodically provide additional data related to the pro ratas (Article 18bis, § 2 RD No. 3). This information allows the tax administration to assess the acceptability of the criteria used by taxpayers who exercise their right to deduction based on actual use. The purpose is to conduct an initial basic check on the VAT deduction of mixed VAT taxpayers.
Taxpayers who have already been applying actual use before December 31, 2022, and wish to continue doing so, were originally also required to notify their VAT office by July 1, 2023.
However, the tax authorities have implemented a "tolerance policy" for 2023. This means that taxpayers who file quarterly VAT returns only need to submit the additional data "for the first time" when filing the VAT return for the first quarter of 2024 (to be submitted by April 20, 2024, at the latest). For monthly filers, this needs to be done when submitting the return for any of the first three months of 2024 (to be submitted by February 20, 2024, March 2024, or April 20, 2024, at the latest).
Sanctions for non-notification
Failure to submit the notification can have severe consequences. Unlike the previous regulation, where licenses could be granted retroactively, the current notification must be made in advance. Failure to comply with the notification requirement may result in the mandatory application of the general “turnover based” pro rata for 2023, leading to potential financial consequences.
How we can assist you
The current notification only indicates that you have previously applied actual use. It does not specify the method used or its validity. If you have any doubts or wish to benchmark your deduction methods, VAT Consult can help determine if you are utilizing the most optimal method and if it meets the legal requirements.
Finally, in addition to optimizing your organization’s VAT deduction, we can guide you through the process of submitting notifications and the additional reporting.