The December advance payment for those submitting quarterly returns.
VAT payers who submit periodic monthly returns are already familiar with the December advance phenomenon, and soon those who submit quarterly returns will also have to keep this requirement in mind. As part of the further simplification of the VAT legislation and administration, the Minister of Finance decided to scrap, as of 1 April 2017, the system of obligatory quarterly advance payments, which was required of those VAT payers who submitted periodic quarterly returns. The idea is that this measure will solve the issue of advance funding for VAT, but you can still pay quarterly advances on a voluntary basis since that date. This means that you can avoid a situation where:
- at the end of a quarter you are required to pay excessive VAT;
- and there is a risk that you have used all the payable VAT funds for other purposes.
However, in order to place those submitting quarterly returns on an equal footing, it was decided that as of this year they would also have to pay a December advance, which must be deposited into the same bank account for Brussels VAT receipts by 24 December, with the usual reference for periodic VAT payments (your VAT number plus two additional figures).
Whether this means that you must actually pay a given sum into the Belgian State’s bank account will depend on the taxed activities performed/received during the third or fourth quarter. That is because, just like those submitting monthly returns, those submitting quarterly returns can decide for themselves how they calculate this December advance payment.
The December advance equals the VAT payable during the 1 October to 20 December period.
Those submitting quarterly returns have two options: they can opt to pay the VAT payable for the 1 October to 20 December period. If you choose this calculation method, then the resultant VAT payable must be filled in in section 91 of the VAT return for the fourth quarter.
- If the VAT payable for the 1 October to 20 December period is greater than the deductible VAT for that same period, then the difference must be inserted in section 91, and it must be paid by 24 December at the latest.
- If the VAT payable for the 1 October to 20 December period is less than or equal to the deductible VAT for that same period, then fill in 0.00 EUR in section 91 and no December advance is payable.
The December advance payment is equal to the VAT paid on the basis of the VAT return for the third quarter.
The second option for those submitting quarterly returns is to pay the VAT payable on the basis of the VAT return for the third quarter once again as their December advance.
- If the balance in section 71 of the VAT return for the third quarter is positive, then the same sum must be paid once again by 24 December;
- If the balance in section 71 of the VAT return for the third quarter is 0.00 EUR or if there is a receivable sum (a VAT refund) in section 72 of the VAT return, then you are not required to pay a December advance to the Belgian State.
If you select this second calculation method, a sum does not have to be entered into section 91 of the VAT return for the fourth quarter. So those who submit quarterly returns can, just like their monthly counterparts, perform the calculation themselves and see which method for the December advance is most advantageous in terms of cash flow. The advance paid is then offset against the balance of the VAT return payable for the fourth quarter, which must be submitted by 20 January of the following year. It is best to diarise the December advance now so that the payment (where applicable) is not forgotten and you find yourself paying interest.
In the end, no optional VAT system for property leasing.
It was announced in the government’s summer agreement that an optional system would be introduced in 2018 for subjecting the rental of property to professionals to VAT. In an earlier article we stated that this measure could consequently offer a future alternative for avoiding the loss of a VAT deduction when, for example, a property company purchases or builds real estate for the purpose of making it available to an operating company that performs its economic activity on those premises (How the Summer Agreement affects VAT groups.
But on 23 October we learned that the government had, for both budgetary and other reasons, decided that weekend to quit the introduction of this optional VAT system for property leasing – a move we find extremely regrettable. This means that, as opposed to what was initially announced, it will not be possible to choose, under certain conditions, to subject property rentals to professionals to VAT as of 1 January 2018. To make property leasing subject to VAT (and thus to be able to exercise the right to deduct VAT on costs incurred with respect to that property), you will have to continue using the options already available, such as creating a VAT group or financial leasing.
However, a new government circular is currently being prepared that will specifically provide for making the VAT regime for renting out warehouse space more flexible. That is because to date the taxman has been of the opinion that renting out storage space can only be VAT liable if the building is used solely as storage space (even though case law has frequently called the VAT authorities to order in this respect). Nevertheless, administrative tolerance applies when no more than 10% of the area of this warehousing space is used as an office by those persons tasked with managing the stored goods.
This so-called 10% rule will be scrapped as of 1 January 2018 and replaced by a 50% rule. So when office space is rented out as part of a warehouse, the rental could still be subject to VAT in its entirety when the area or the volume of offices makes up less than 50% of the total area or volume of the building (and can thus result in a right to deduct input tax on the part of the lessor). At the time of going to print the circular had not yet been published, but we will let you know as soon as it appears on Fisconet.
Clarity from the VAT authorities – penalties resulting from delays in performing agreements qualify as damages.
In a recent government circular dated 25 October 2017, the VAT authorities highlighted the fact that those sums paid in the form of damages as a result of the tardy performance of agreements constitute ‘damages due to delays’ and consequently do not affect the yardstick for taxing the agreed-to transaction. It is a regular occurrence in, for example, the construction industry that the contractor is required to pay a specific sum recorded in the contract because the performance of the work has been delayed. In practice that sum is deducted from the agreed-to price that the client pays to the contractor.
The taxman has now underscored the fact that this ‘compensated deduction’ cannot be considered as a price discount on the transaction originally agreed to, which can be deducted from the original yardstick for determining the levy and means that less VAT is payable. In reality it is considered to be damages, which fall outside the scope of VAT and do not affect the yardstick for taxation that was originally agreed to. Let’s say that the agreed-to price is 1,000.00 EUR (excluding VAT) and the penalty for delayed performance is 10%. In practice the client would then pay 1,110.00 EUR to the contractor (1,000.00 EUR + 210.00 EUR VAT – 100.00 EUR default penalty). However the VAT payable and to be surrendered to the Belgian State remains 210.00 EUR.