Reform of the VAT chain
24/05/23
According to the European Commission’s latest report, the VAT gap – the difference between estimated and actual VAT revenues – currently stands at around €4,444 billion. In Belgium, this gap accounts for 12% of the total VAT revenues to be collected, which is considerably higher than in neighboring countries.
To tackle this issue, the Belgian Chamber of Representatives has approved the Law of 12 March 2023 (gazetted on 23 March 2023), which aims to modernize the VAT chain and collection of VAT debts. The law includes measures to improve the processing of periodic VAT returns and payments by introducing digital systems and automation, among other things.
VAT returns filed more than 3 months late may trigger substitute VAT returns
One of the main changes proposed by the reform is the introduction of a substitute VAT return procedure. Starting from 1 January 2024, taxpayers who do not file their periodic VAT returns on time will receive a proposal for a substitute VAT return based on the highest amount of VAT due over the last 12 months (the minimum being €2,100). The tax authorities can send this proposal up to 3 months after the deadline to file the VAT return has passed.
Taxpayers will then have one month to file a new (correct) VAT return (different from the one that is proposed) if they do not agree with the proposal. This will terminate the substitute return procedure. If taxpayers do not file a return within one month, the substitute return becomes final and the VAT is due. This new measure is intended to automate and speed up the processing of late VAT returns. These changes also mean that going forward there will be sanctions for the late filing of VAT returns.
An important note in this respect is that the deadline to file quarterly VAT returns has been extended from 20th to the 25th of the month following the reporting period.
These new measures are in line with the recent tax procedure reform that extended the ordinary VAT statutes of limitation from a period of 3 years to 4 years in the event of late filing or failure to file a tax return (see our previous newsflash: https://www.pwclegal.be/en/news/law-of-20-november-2022-on-various-fiscal-and-financial-provisio.html).
What about refund claims?
Another significant change is the replacement of the VAT current account with a new VAT provision account. This should simplify the management of payments, refunds, debts, and credits for taxpayers. Under the current procedure, refund claims can only be submitted through the periodic VAT returns and they apply to the entire credit of the current account.
From 2024, refund claims will only apply to the positive balance resulting from the VAT return concerned and not to the credit amounts accumulated up to that point. VAT credits that are not claimed in the VAT return or that do not meet the refund conditions will be booked on the VAT provision account. Taxpayers can request a refund of the accumulated VAT credits through the MyMinfin platform.
The enhanced system will offer greater flexibility to taxpayers. Those who file a monthly VAT return will now receive an automatic monthly refund and no longer require special authorisation. Moreover, taxpayers will have the ability to manage credit amounts through an online platform, giving them greater control over their VAT account. It’s important to note that non-compliant taxpayers will face appropriate consequences.
New deadline to reply to a request for information
From next year, taxpayers will have one month to reply to a request for information sent by the tax authorities regarding VAT matters. This is a new development as the VAT Code does not provide for any deadlines. If the tax authorities do not receive a reply within that time, they will be allowed to use the existing ex-officio taxation procedure and may also impose a tax increase as a penalty.
The deadline mentioned above may be reduced to 10 days under certain circumstances. This includes situations in which there is a potential risk of non-payment to the government or when the request for information pertains to a refund claim through the periodic VAT return. In the latter scenario, the tax authorities will have the authority to provisionally seize the VAT credits as a protective measure.
These measures will be effective from 1 January 2024. They are in fact but a foretaste of a much broader revamp of the VAT system (see PwC’s newsflash: https://news.pwc.be/vat-in-the-digital-age-proposals).
Do not hesitate to contact us if you have any questions.
