New circular regarding the VAT rate for restaurant and catering services

On 1 January 2010, the VAT rate for restaurant and catering services was reduced to 12%. This rate only applies to food. Drinks (including non-alcoholic beverages and coffee and tea) are still subject to the standard VAT rate of 21%. On 23 December 2009, the administration published an explanatory note in which it detailed how an overall price for a menu (including drinks) needed to be split, in order to determine the VAT (Decision ET. 117.557 dated 23.12.2009).  
Due to the lack of clarity surrounding certain points and the fact that the Circular was no longer in line with the evolutions regarding the distinction between the supply of goods and the provision of services, a new explanatory note was published on 4 April (Circular 2019/C/26), which replaces the 2009 decision. 

If an overall price is charged for a restaurant or catering service that includes both the food and the drink, this price needs to be split in order to apply the correct VAT rate: 21% for the drinks and 12% for the food. If the restaurant operator or caterer does not make this split, the full price must be subject to the highest VAT rate, i.e. 21% in this case.  

The 2009 decision provided for a (too) strict rule 
The part of the overall price to be attributed to the share of the drinks must in principle correspond to the 'normal value' of the drinks, which the Administration defined as (translation) "the price that the customer would normally have to pay if the drinks were purchased separately". 

This strict interpretation overlooked the fact that a fixed menu price is usually lower than the sum of the items when they are purchased separately. By requiring that the drinks be based on the menu price, this reduction is charged exclusively in the food (subject to a lower VAT rate). In practice, this led to disagreements during inspections. However, in the 2009 circular, the VAT administration accepted a fixed rate of 35% for standard "all-in" menu types with three or more courses (i.e. menus containing an aperitif, accompanying wines, mineral water and coffee or tea). As long as it was substantiated and the VAT administration agreed, a different coefficient could be applied.  

The new circular is less strict
The new circular provides for the possibility to split the single price in another way than on the basis of the 'normal value' of the drinks, by allowing for a split based on a 'rule of three'. This method is referred to as the "split according to the percentage share". 

The split can now also be done on the basis of the percentage share of drinks in the overall price. As such, when determining the menu price, the reduction is split proportionately between drinks and food.  

The VAT administration provides the following example in its circular to illustrate this: 

In a fast food restaurant, a menu consisting of hamburger, chips and a drink is offered at an overall menu price of €6.74, including VAT. The components are also offered separately ('à la carte') each at a separate price, including VAT: 

  • The 'à la carte' price of a drink is €2.05.
  • The total of the 'à la carte' price of a hamburger and the 'à la carte' price of chips is €6.24. 

The overall menu price is therefore €1.55 cheaper for the customer than if they were to order the components separately at the 'à la carte' price. 

The splitting of the 'overall menu price' in accordance with the above-mentioned principle, whereby the share allocated to the drink (including VAT) therefore amounts to €2.05 (= the 'à la carte' price of the drink), results in the drink being overvalued with respect to the food, since the discount also partly relates to the drink. 

In this situation, the administration therefore considers the percentage share: 

  • Of the 'à la carte' price of the drink in the total 'à la carte' price as a correct and objective key to ascertaining the value of the share (including VAT) of the drink in the overall menu price. 

The percentage share of the 'à la carte' price of the drink (€2.05) in the total 'à la carte' price (€8.29) is 24.73% in the above-mentioned example. According to this key, the share (including VAT) to be allocated to the drink in the 'overall menu price' is therefore €1.67 (i.e. 24.73% of €6.74). 

  • Of the 'à la carte' price of the food in the total 'à la carte' price as a correct and objective key to ascertaining the value of the share (including VAT) of the food in the overall menu price. 

The percentage share of the 'à la carte' price (the 'à la carte' price of a hamburger and chips being €6.24) in the total 'à la carte' price (€8.29) is 75.27% in the above-mentioned example. According to the key, the share (including VAT) to be allocated to the food in the overall menu price is therefore €5.07 (i.e. 75.27% of €6.74). 

In the new Circular, the administration confirms the possibility of using a fixed coefficient of 35% to determine the share of drinks for standard 'all-in' menu types with three or more courses (i.e. menus with an aperitif, accompanying wines, mineral water and coffee or tea) for the future as well. 

This coefficient therefore still only applies in the future for this situation (all-in menus with 3 or more courses) and not to other all-in formulas where, for example, spirits and champagne or all drinks after midnight are included. 

Moreover, this coefficient is still not mandatory, which means that restaurant operators or caterers can deviate from it, under the control of the administration, if a different price policy is applied. The administration can also contest the 35% rate if it deviates from reality in specific cases. 

Menu price with an (optional) additional price for drinks 
The administration now also makes a judgement on the situation when a separate price (including VAT) is indicated on the menu for drinks (e.g. accompanying wines which are optional for a given menu). In that case, the VAT is included in the additional price, subject to the 21% rate

The price of the menu without the optional drinks also needs to be split further if that menu includes other drinks as standard (e.g. aperitif or coffee). This is in fact merely a confirmation of the rules that were already applied in practice. 

Conclusion
The new updated Circular confirms the already existing coefficient of 35%, but offers an additional alternative with the percentage share method. For all-in menus where the percentage share of drinks is less than 35%, this offers the simple possibility to limit the drink component (21%) of the overall price. 

7 consequences of incomplete registration
The importance of correct registration in the crossroads bank for enterprises in 2019
Each company has its unique registration in the Crossroads Bank for Enterprises (CBE). However, businesses often forget to keep this registration up to date. This may have unpleasant consequences. The CBE is a register managed by the Federal Public Service Economy in which all basic information about companies and their establishments is kept. The CBE centralises the basic information about com
Are they 50% or 100% deductible?
Reception costs of a publicity event are only deductible in part
According to the letter of the law (art. 53, 8° of the Income Tax Code (WIB), reception costs incurred during a business related event are only 50% deductible. For some time already, there have been ongoing discussions concerning the question whether or not this limited deductibility likewise applies when the reception costs are incurred within the context of a publicity event.  And do these
Not as obvious as many people think
Restructuring? Think about your directorships
The restructuring of a company involves many aspects. An element that is often forgotten is the directorship positions held by the acquired company in a number of other companies. The question is what will happen with these directorships once the company holding them disappears as a result of a merger or division. In many cases, the intention is that these directorships will continue uninterrupted
This year it will be more likely that people will need to respond
Simplified declaration proposal? Check it thoroughly and respond in good time!
The number of simplified declaration proposals has been on the rise for several years now. This year, more than 3.2 million Belgians will receive such a proposal. If nothing needs to be changed, you do not need to respond either. However, if something does need to change (i.e. the Tax Authorities hold incorrect or incomplete data), then you must respond in good time. This year,
Also companies are required to follow the procedure
Conflicts of interest in the new Companies and Associations Code
The new Companies and Associations Code (CAC) entered into force on 1 May 2019. The CAC provides for broader and stricter regulations concerning conflicts of interest that may arise within an organisation. Broadening the scope of regulation means that the directors of cooperative companies, non-profit organisations (ASBL/VZW) and foundations&n
Important things you have to know
Some do’s and don’ts when making a bank donation
The bank donation is still a very popular way of donating money by bank transfer. This is not surprising: if it is carried out according to the rules of the game, the bank donation is a valid donation, without (too much) red tape and without incurring gift tax. However, there are a few rules that threaten to spoil the game if they are not followed correctly. Hence some tips that you should keep in
The further course of the relationship between the UK, the EU and the EEA
What impact will Brexit have on your corporate income tax?
For the time being, the United Kingdom (UK) is still part of the European Union (EU) and the European Economic Area (EEA). The UK has since been given until 31 October 2019 at the latest to implement Brexit. This means that cross-border transactions with the UK continue to fall within the scope of EU directives. However, after Brexit, the UK will no longer be able to rely on these directives. This
From now on, also 'high' fixed cost deductions for self-employed persons
Personal income tax return form AY 2019: several new features explained
From now on, also 'high' fixed cost deductions for self-employed and other changes  The new personal income tax return form for assessment year 2019 was published on 7 April, the starting shot for the annual tax return race. For the Flemish tax return, "only" 6 codes have been added, and for the Walloon and Brussels tax returns, "only"
Does the new definition of a company have any consequences for your organisation?
Broader requirements for registration with the CBE - clarification for unincorporated companies
In a previous article, we explained that the introduction of a definition of 'company' in the new Companies and Associations Code (CAC) also affects the registration with the CBE (Crossroads Bank for Enterprises). In this article, we will discuss in more detail the registration obligation for unincorporated companies.  Consequences of the broader definition of a company  With the new
Noticeable impact on tax matters
Impact of Brexit on registration and inheritance tax
The tension in the United Kingdom is palpable. In the meantime, the initial date of Brexit, 29 March 2019, has been delayed. Depending on whether an agreement will be reached or not on 29 March, UK's departure date will be moved to 12 April 2019 in case of a hard Brexit (no deal) and to 22 May 2019 in case of a soft Brexit (deal). It is clear that Brexit will have an impact on tax matters, bo

Subscribe to our newsletter