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VAT Grouping Introduced In Belgium

by Ulrika Lomas, for LawAndTax-News.com, Brussels

17 April 2007


International law firm, Linklaters reported last week that Belgium, along with 14 other EU member states, adopted a VAT grouping system at the beginning of the month, allowing all VAT taxpayers established in Belgium that are legally independent but closely linked to each other the option of grouping themselves into a VAT Unit.

According to Linklaters:

"Members of a VAT Unit are considered as forming one single VAT taxpayer. This means that goods or services supplied to one member of the VAT Unit by third parties are considered as supplied to the VAT Unit, and that goods or services provided by the individual members of a VAT Unit to third parties are considered as provided by the VAT Unit."

"Transactions between members of the VAT Unit fall outside the scope of VAT. As a result, the VAT status of the VAT Unit, and its right to deduct input VAT, is determined solely on the basis of its transactions with third parties."

The firm went on to explain that:

"Members of a VAT Unit must be established in Belgium. This means that both Belgian companies and Belgian establishments of foreign companies may be part of a VAT Unit, but foreign establishments of Belgian companies are excluded. Anti-channelling provisions will be introduced at a later stage."

"In addition, members of a VAT Unit must be closely linked to each other, from a financial, economic, and organisational perspective. A VAT Unit can decide to leave out certain companies. However, a subsidiary in which a group member has a participation of more than 50% has to be included in the VAT Unit, unless it is demonstrated that there is no sufficient economic and/or organisational link."

Advantages of the new regime for firms which choose to form a VAT unit will, according to Linklaters, "include the fact that cost-cutting solutions such as outsourcing and centralisation of administrative, accounting, IT or back-office activities will be possible without any VAT cost. As a consequence, intra-group cash flows will be reduced".

Additionally, VAT-exempt activities, such as financial services or real estate renting, will no longer trigger non-deductible VAT if supplied within a VAT Unit.


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