The VAT authorities have clarified the new VAT exemption for services provided by independent groups of persons to its members (Circular no. 31/2016). It has emerged from this clarification that rapid action is (possibly) required by no later than 20 and 31 January 2017! (see below). This could affect groups, joint ownerships of exempted tax subjects or non-taxable legal entities that previously shared costs, with this irrespective of whether the group’s members were legally distinct. This covers groups of doctors, dentists, schools, trade union associations, a range of nonprofits, public institutions and many others, which pass costs on, distribute fees, charge remunerations for practices, etc.
This means it is important to check whether your cost-sharing association will be affected by this new VAT exemption law, as we must assess whether actions must be performed for them. Do they still fall under the new amended VAT exemption for independent groups of persons; are specific actions required within the group and with respect to the VAT authorities (obligation to inform, what about the group’s staff, etc); and which VAT obligations must be fulfilled as of the present?
1. Declaration of activities commencing to be submitted by 31 January 2017.
Within a month of the activities commencing, the independent group of persons must:
- submit a declaration to its VAT inspection office; AND
- present a list of members together with the activities performed.
When it comes to independent groups of persons that were already in existence prior to 1 July 2016 and independent groups that were established between 1 July 2016 and 31 December 2016, the VAT authorities are demanding that the declaration and list be submitted no later than 31 January 2017.
Independent groups of persons that have opted for the transitional scheme (i.e.: which has continued to apply the old rules for exemption for cost-sharing associations since 1 July 2016) must, within a month of deciding to leave this transitional scheme, complete these formalities. Given that the transitional scheme automatically ended on 31 December 2016, they must consequently comply with this obligation to provide information by no later than 31 January 2017, unless they already decided earlier to leave the transitional scheme.
2. Historical deduction of VAT from 2013 in December or fourth quarter returns (20 January 2017).
Since 1 July 2016 independent groups of persons can also engage in taxable activities (such as services for third parties or taxable deliveries) and thus obtain a partial right to deductions. Such a group can exercise its right of deduction from historical input tax by means of a review – through its allocation in the periodic VAT returns -
- for goods and services other than operating assets that are not yet used or consumed on 1 July 2016 AND that are intended for the group’s taxable activity;
- for the operating assets that are extant on 1 July 2016, insofar as such items are still usable, the review period of 5 or 15 years is still ongoing AND the operating assets are intended for the group’s taxable activity.
For VAT that became due in 2013, the right of deduction expired on 31 December 2016. However, the VAT authorities are allowing this VAT to be deducted in the VAT return for the month of December 2016 (for those submitting their returns monthly) or for the fourth quarter of 2016 (for those submitting their returns quarterly), which must be submitted by no later than 20 January 2017.
3. Joint ownerships between members are definitely no longer VAT exempt as of 1 January 2017.
The joint ownerships that previously existed between various members are no longer entitled to this specific VAT exemption as of 1 January 2017. The VAT exemption is now only applicable to:
- associations with legal personality;
- associations that do not have legal personality that act under their own names as an independent association or group vis-à-vis their members and third parties. For the latter category of autonomous groups, the founding members must conclude a cooperation agreement within which a range of statements must be included.