Belgium

Proof of appointment for inspection officers

(2006/01/BE/VAT/__/appointment/inspection/MGO) by marc.govers@vat-house.com

It is true that the proof of appointment belonging to the officers of the Federal Government Department of
Finance still need to be adapted in terms of certain statements they contain. In order to regularise this situation,
however, the Minister of Finance wishes to wait for the definitive results of the Copernicus reforms in order to
propose a definitive draft fro a Royal Decree that can be carried out in its entirety. In anticipation of this, the
current models for the proof of appointment can continue to be used. As for the legality of inspections, the
Minister believes that they cannot be disputed for this reason. Indeed, the proofs of appointment in question
clearly indicate the identity of the officer or official in question, as well as the fact that s/he belongs to a
department charged with the application of the tax laws, and specifically the clauses concerning inspection and
auditing legislation contained in these laws. The Minister is not aware of any legal rulings that would make the
proofs of appointment currently in use irregular. (Q&A, Senate, 2004-2005, Q. no. 3-2954 from Mr Brotcorne on
30 June 2004, nr. 3-49, 4150).

Application of article 93undecies B of the VAT Code

(2006/01/BE/VAT/93undecies WBTW/NOT AINV 7/2005/debt/liquidation/transfer/MGO) by marc.govers@vat-
house.com

The tax authority has published Notice no. AINV 7/2005 of 5 December 2005, concerning article 93undecies B of
the VAT Code, which is a measure to prevent the declaration of bankruptcy in the context of a (fraudulent)
transfer of a totality of goods. The aim of article 93undecies B of the VAT Code is firstly to prevent that a natural
or legal person transfers their trading company without paying their VAT debts, and secondly to fight the fraud
committed by certain taxpayers in difficult circumstances who liquidate all their assets when they realise that their
tax circumstances are under inspection. This is a similar condition to that in article 442bis, WIB/92, which has
been included in the VAT Code, with the result that the VAT Receiver has the same powers and certainties as
the Receiver of direct taxes.

The Notice gives a more detailed explanation of:

- the transfers concerned (in principle all transfers, irrelevant of whether article 11 of the VAT Code is applied)
- the transfers not concerned (e.g. transfers by receivers, such as mergers, splits and other transactions carried
out according to the terms of the Companies Act)
- postponed opposition to the transfer (only opposable after the end of the month following the month in which
the VAT Receiver was informed; if this period has not expired, the transfer does not exist in the eyes of the
Receiver, and he can therefore pursue the transferred goods)
- several liability of the person receiving the transfer (once the period has expired, the person receiving the
transfer becomes severally responsible for the debts of the transferor, limited to the amount outstanding in tax
debts or the price of the transfer
- the certificate to be requested (only if there is a certificate with the provision of the copy of the transfer
agreement, stating that the transferor is free of debts, can several liability be waived for the person receiving the
transfer; the certificate is to be provided when there are no debts; neither may an audit be in progress; certificate
must be provided by the VAT receiver within 30 days; the certificate is valid for 30 days; it is the transferor who is
responsible for requesting the “free of debt” certificate the transferor shall theoretically attach the certificate to a
copy of the transfer agreement.
- applicable to agreements signed from 19 September 2005 onwards.

People on placement with bailiffs, applicant bailiffs, self-employed colleagues of the bailiff
(2006/01/BE/VAT/44 WBTW/ E.T. 109.278/bailiff/MGO) by marc.govers@vat-house.com

In accordance with article 44, § 1 , 1° of the VAT Code, the services rendered in the exercise of the regular
activities of court bailiffs are exempt from VAT. This exemption is limited to the person of the court bailiff who is
acting in the exercise of his/her tasks, and is in principle not applicable to people on placement with bailiffs and
applicant bailiffs. Of course it does not apply either to self-employed colleagues of these bailiffs. However, taking
into account article 5 of the Royal Decree of 30 June 1993 concerning the placement for applicant court bailiffs
and the official recognition of this placement, and in accordance with the standpoint taken by the tax authority
concerning placements in other liberal professions (see parliamentary question no. 341 of 4 January 1993 from
Mr Simonet MP, BTW-Rev., no. 104, 590), the tax authority will accept that a person on placement with the court
bailiff, even if this person is considered self-employed for the purposes of social security law, can be considered
a subordinate of the court bailiff and placement mentor during the placement. On this assumption, therefore, the
person on placement does not have the capacity of a VAT payer for the services provided to the placement
mentor during the placement, whose duration is explicitly set by article 510, 5°, of the Legal Code. Even though
legal persons always act independently, for the sake of fairness it is accepted that in analogy with natural
persons, a civil company whose activity solely consists of services usually provided by a person on placement
with the court bailiff to the placement mentor, does not have the capacity of a VAT payer for this activity either.
However it goes without saying that the person on placement with the court bailiff or the aforesaid civil company
can reject this allowance and request VAT identification for their placement activities. However, if the person on
placement with the court bailiff or the aforesaid civil company also carries out other transactions besides the
placement activity, independently and in the context of an economic activity, which are covered by the VAT
Code, the placement holder or company in question must be considered a VAT payer without distinction for the
totality of their activities. The arrangement above also applies in turn to persons on placement with solicitors,
applicant solicitors and the self-employed colleagues of solicitors. (Decision of 15 June 2005, no. E.T. 109.278,
www.fisconet.fgov.be).

Monthly VAT refunds

(2006/01/BE/VAT/15 WBTW/E.T. 110.224/supply/gas/electricity/return/monthly/MGO) by marc.govers@vat-
house.com

The rules for the place of supply of gas through the gas distribution system and electricity (art. 15, § 2, second
part, 4° VAT Code) which came into force on 1 January 2005, may lead to companies active in cross-border
trading and distribution of gas through the gas distribution system and electricity being confronted with
permanent and significant VAT credits. The current rules for monthly VAT refunds (art. 81, § 2, first part, 3° of
R.D. no. 4 and AOIF Notice no. 24 of 4 September 2003) do not allow supplies of gas through the gas
distribution system and electricity that take place abroad according to article 15, § 2, second part, 4° of the VAT
Code to be considered exempt turnover. For the application of the monthly VAT refund system, however, the
VAT authority does allow that certain supplies considered to take place abroad, where the goods concerned are
intended for use abroad, and therefore result in a tax credit, can be added to the exempted turnover (point 19 of
the aforesaid Notice). Since supplies of gas through the gas distribution system and electricity from Belgium,
which on the basis of article 15, § 2, second part, 4°, of the VAT Code take part abroad, meet these criteria, and
as long as the VAT credit results from the input tax imposed on these goods, the tax authority has decided that
these transactions can be considered for the calculation of the exempted turnover. For similar reasons as those
covered in point 19, 5) of the aforesaid notice, therefore, the services in article 21, § 3, 7°, l) of the VAT Code
(namely the transportation of gas and electricity and the transactions linked to this transportation) can also be
considered for the determination of the exempted turnover, on the condition that, on the basis of the aforesaid
article, they can be considered to take place abroad. This decision is an addition to the conditions of point 19 of
AOIF Notice no. 24 of 4 September 2003 (Decision of 13 December 2005, no. E.T. 110.224,
www.fisconet.fgov.be).

Assets brought in from a branch of activity

(2006/01/BE/VAT/11, 18, 46, 117 WBTW/RUL 500.020/asset/branch/MGO) by marc.govers@vat-house.com

A company is considering bringing a branch of activity (together with a share in that branch) from company A NV
into the existing granddaughter company B NV. Since the share in the operation of the activity of the branch is
integrated, the branch of activity that has been brought in can lead an independent existence with its own means,
the bringing in of assets will occur in return for a payment consisting exclusively of shares in the obtaining
company, and the parties declare that they meet the formal conditions, the transaction meets the requirements
for classification as a branch of activity as stated in article 46, § 1, first part, 2° of the 1992 Income Tax Code,
and the transaction comes under the exemption in article 117, § 2 W.Reg. and articles 11 and 18, § 3 of the VAT
Code. Moreover, the justified financial or economic needs have been met, as described in article 46, § 1, third
part, 2° of the 1992 Income Tax Code (Ruling of 12 May 2005, no. 500.020, www.fisconet.fgov.be).

Transfer of immovable property

(2006/01/BE/VAT/__/RUL 500.037/sale/building/MGO) by marc.govers@vat-house.com

A promise of sale has been signed for the transfer of a new building with VAT applied. In the meantime, a conflict
has arisen between the parties that has led to a verdict from the Court of Appeal, requiring a writ to be served
within four months with its condition the payment, by the acquirer, of a sum of money as a retainer. At that point
the sale had not yet been completed with authentic documents since the parties could not agree to the applicable
taxable basis that had to be taken into consideration for the calculation of the VAT owed and the deduction of
this VAT in the name of the sellers. However, the sellers had not taken the option provided concerning VAT,
namely to sell the immovable property with VAT applied. The sale cannot take place under this scheme, taking
into account the fact that a promise of sale has been signed and a deposit paid. The transaction has already had
fiscal consequences. It can no longer be the subject of a ruling. The application must be considered inadmissible
(Ruling of 19 May 2005, no. 500.037, www.fisconet.fgov.be).

Transfer of a totality of goods

(2006/01/BE/VAT/11, 18 WBTW/RUL 500.042/totality/transfer/MGO) by marc.govers@vat-house.com

A merger created by the takeover of company B NV by company A NV, whereby A NV previously owned 99.97%
of the shares in B NV:
- meets justified financial or economic needs with a view to obtaining the system described in article 211, § 1,
second part, 3° of the 1992 Income Tax Code
- comes under the exemption in article 117, § 1 W.Reg. since the totality of B NV is being brought into the
existing company A NV
- falls within the scope of articles 11 and 18, § 3 of the VAT Code (Ruling of 19 May 2005, no. 500.042,
www.fisconet.fgov.be).

Invoice obligation – return obligation

(2006/01/BE/VAT/22, 42 WBTW/RUL 500.092/return/invoice/MGO) by marc.govers@vat-house.com

A company established in Belgium hires out boats intended for the transportation of petroleum and derivative
products. The transactions are exempted from VAT by application of article 42, § 1, first part, 3° of the VAT
Code. Since the turnover figure is exempted from VAT, the VAT payer wishes to be relieved of the obligation to
issue invoices and to fill in the boxes intended for outgoing transactions on the periodic VAT returns. The
application is aimed at obtaining a deviation and therefore aims for the non-application of the tax laws. Moreover,
the Federal Government Department of Finance, in accordance with article 22, first part, 3° of the law of 22
December 2002, and article 1, first part, 3° of the R.D. of 17 January 2003 may not rule on questions with
particular reference to the return. Consequently the application must be considered inadmissible (Ruling of 9
June 2005, nor. 500.092, www.fisconet.fgov.be).

Provision of housing
(2006/01/BE/VAT/44 WBTW/RUL 500.014/housing/rent/advantage/MGO) by marc.govers@vat-house.com

If a company makes the use of a dwelling available to its director, without the latter being obliged to pay any rent,
it cannot be concluded that this is a free provision unless the beneficiary obtains an advantage resulting from
his/her function as a director. Such a provision must be considered a rental for valuable consideration and it is
therefore exempted from VAT by article 44, § 3, 2° of the VAT Code. The VAT imposed on the acquiring of an
immovable company asset is therefore not deductible to the extent that the property is provided “free” to the
director (Ruling of 14 April 2005, no. 500.014, www.fisconet.fgov.be).

Service provided by independent groupings of persons to their members

(2006/01/BE/VAT/44 WBTW/RUL 500.0119/non-proft/supply/member/MGO) by marc.govers@vat-house.com
Supplies of administrative services by an IVZW (non-profit organisation) to its members, which are exempted
from VAT on the basis of article 44, § 3, 4° of the VAT Code, are not exempted according to article 44, § 2, 1bis
of the VAT Code because the services are not directly necessary for the exercise of the members’ activity and
the IVZW does not only ask for repayment of their share in the common costs. The place of service is determined
in article 21, §§ 2 and 3, 7°, d of the VAT Code, because the term “VAT payer” must be understood to mean “all
persons who exercise an economic activity in the sense of the Sixth VAT Directive.” These services give the VAT
payer the right to deduct their input VAT (Ruling of 28 August 2005, nr. 500.119, www.fisconet.fgov.be).

Performing Artists
(2006/03/BE/44 WBTW/E.T. 108.828/artist/MGO) by marc.govers@vat-house.com

Please refer to the Resolution of 30 September 2005, no. E.T. 108.828, for the scope of the exemption in article
44, § 2, 8°, second sentence, of the Belgian VAT Code. The Minister of Finance has decided that the application
of the amended standpoint will be postponed until 1 July 2006 (Decision of 23 December 2005, no. E.T.
108.828/2, www.fisconet.fgov.be).

Company assets acquired in the capacity of a non-VAT payer

(2006/03/BE/45 WBTW/1, 2 RD3/E.T. 110.412/asset/person/MGO) by marc.govers@vat-house.com

On 2 June 2005, in its judgement on case C-378/02, Waterschap Zeeuws Vlaanderen, the European Court of
Justice confirmed the standpoint it had already taken in its judgement on case C-97/90, Hansgeorg Lennartz, on
11 July 1991. In both these judgements, the Court had ruled that article 17 of the Sixth VAT Directive (converted
into article 45 of the Belgian VAT Code and articles 1 and 2 of R.D. no. 3) determines the time when the right to
deduct occurs and that it follows from this condition that only the capacity in which the person concerned acted at
the time of purchasing the goods can determine whether a right to deduct exists. Moreover, the Court pointed out
that article 20 of the Sixth VAT Directive (converted into articles 48, § 2, and 49, 3°, of the VAT Code and articles
6 to 11 of R.D. no. 3) do not contain any condition relating to the arising of a right to deduct, but instead set the
calculation method for the revision of the original deduction. Thus they cannot bring about any right to deduct nor
convert the VAT paid by VAT payers in connection with their non-taxed transactions into deductible VAT in the
sense of article 17 of the Sixth VAT Directive. This jurisprudence therefore clearly entails that when natural
persons or legal persons have bought goods in the capacity of non-VAT payers, and then obtain the capacity of
VAT payers and use these goods as company assets for their economic activity, they are not permitted to deduct
the VAT imposed on the purchase of these goods fully or in part. Taking the above into account, Resolution no.
E.T. 18.235 of 10 November 1976, which allowed VAT payers to partially deduct the VAT imposed on obtaining a
company asset before they had the capacity of VAT payers, was revoked on 1 July 2005. Of course the same
applies to other commentaries published by the tax authority and, among other things, to the answer to
parliamentary question no. 25 on 26 January 1982 from Senator Jorissen. In order to avoid any
misunderstanding, it is emphasised that this does not of course have anything to do with the situation in which
persons who are not yet identified for VAT purposes incur costs in the context of transactions that are clearly
carried out in preparation for the exercising of an economic activity. On this assumption, such persons have the
capacity of VAT payers for their preparatory transactions and may as such deduct the VAT imposed on the
goods and services acquired, even if these transactions precede identification for VAT purposes (ECJ, 14
February 1985, case 268/83, Rompelman) (Resolution of 20 December 2005, no. E.T. 110.412,
www.fisconet.fgov.be).

Amendment to R.D. no. 20

(2006/04/BE/VAT/1bis, 1ter RD 20/rate/reduced/labour/service/MGO) by marc.govers@vat-house.com

The Royal Decree of 19 January 2006 amending R.D. no. 20 was published in the Belgian Official Gazette of 1
February 2006, third edition. In articles 1bis and 1ter of R.D. no. 20, the words “up to and including 31 December
2005” have been removed, meaning that the conditions for the application of the 6% reduced VAT rate to labour-
intensive services will apply with no time limit. This took effect on 1 January 2006.
Please note that a time limit has been set at European level, namely 31 December 2010.

Amendment to the Intrastat R.D.

(2006/04/BE/INT/__/threshold/MGO) by marc.govers@vat-house.com

A Royal Decree of 11 January 2006 amending the R.D. on Intrastat of 9 January 2005 was published in the
Belgian Official Gazette on 30 January 2006. The amendment has changed the return threshold of 250 000 EUR
to 1 000 000 EUR (consignments) and 400 000 EUR (receipts) respectively.

Local sewers
(2006/04/BE/VAT/45 WBTW/disposal/waste/water/sewer/rate/MGO) by marc.govers@vat-house.com

In accordance with article 45 of the Belgian VAT Code, local authorities can exercise their right to deduct from
the point when they are liable for the VAT on the collection and disposal of waste water. They can approach their
VAT inspection office in cases of doubt. There must be a direct link between their investments and the activity for
which the local authority in question has the capacity of a VAT payer. The Minister of Finance has requested the
tax authority to give its standpoint on the right to deduct for Flemish local authorities which are VAT payers for
collecting and disposing of waste water, especially concerning the revision of VAT on capital assets to their
advantage. There has already been a discussion of this with the Secretary of State’s advisors on 18 January
2006. The application of the 6% reduced VAT rate to all investments is not possible on the basis of annex H to
the Sixth VAT Directive (Verbal question, Commission for Finance and the Budget, 25 January 2006, Beknopt
Verslag, COM 825, 5).

Donation of goods to a charity

(2006/04/BE/VAT/__/donation/charity/self-supply/MGO) by marc.govers@vat-house.com

If a VAT payer removes goods from stock in order to give them to a charity, this is considered a taxable supply.
In theory, therefore, the charity must pay VAT on the purchase price of the goods. In practice, however, the tax
authority will accept that VAT is charged on the value of the goods at the point when they are donated. An
exemption from VAT is not possible by law because the donated goods are intended for consumption. The
strictness of this law is linked to fraud prevention. However the Minister of Finance is prepared to investigate
whether the government can organise an operation to regulate donations from stock. A legal framework will be
very difficult (Verbal question, Commission for Finance and the Budget, 25 January, Beknopt Verslag, COM 825,
10).

VAT rate for an individual water purification system

(2006/04/BE/VAT/AnnA RD 20/E.T. 109.807/water/purification/rate/MGO) by marc.govers@vat-house.com

In the answers to parliamentary questions no. 983 of 25 March 1994 (Pierco) and no. 797 of 1 October 2001
(Wauters), it was made clear that the supply and installation of an intensive individual water purification system
(underground tank) could benefit from the 6% reduced VAT rate, as long as all the conditions of category XXXI of
table A of the annex to R.D. no 20 were met. According to these answers, the supply with installation of an
extensive individual water purification system or water purification basins (open-air tanks with purification done
by plants) could not benefit from the 6% reduced VAT rate, however, because the work on immovable property
and other immovable activities linked to such an installation are not related to the actual dwelling itself, but rather
come under the category of conversion work or the creation of a garden, more specifically because of the added
aesthetic value that such an installation provides to the living environment.
At the request of the Minister of Finance, the tax authority has made a new investigation of these issues. Despite
the arguments in favour of the application of the standard VAT rate, it must be confirmed that an extensive
individual water purification system or water purification basins to which household waste water is channelled to
be purified is nowadays uncontrovertibly part of the sanitary installation of a dwelling, in the same way as an
intensive individual water purification system. For this reason, the supply and installation of components for such
a system can benefit from the 6% reduced VAT rate described in the aforementioned category XXXI as long as
all the other requirements of this clause are met, of course. VAT payers who have applied the standard VAT rate
to activities that could have benefited from the 6% reduced rate, give the above, can exercise their right to a
refund of the excess VAT collected, as long as they comply with the formalities of article 79 of the VAT Code and
article 4 of R.D. no. 4, and as long as the rules for expiry of the claim are applied.
The principles described above apply in turn to categories XXXII and XXXIII of table A and category X of table B
of the annex to R.D. no. 20 (Decision of 22 December 2005, no. E.T. 109.807, www.fisconet.fgov.be).

Deduction of the VAT imposed on toll charges

(2006/04/BE/VAT/18, 45 WBTW/E.T. 103.391/toll/deduction/MGO) by marc.govers@vat-house.com

In accordance with article 45, § 2, first part, of the VAT Code, the deduction of the VAT paid on the supply, import
and intra-Community acquisition of automobiles for passenger transport, including vehicles that can be used for
both passenger and goods transport and including the goods and services related to these vehicles, cannot
under any circumstances exceed 50% of the VAT paid. The allocation of the right of access to roads and of the
right to use them is a service covered by article 18, § 1, second part, 15°, of the VAT Code. However this service
is not to be considered “a service related to a vehicle” in the sense of article 45, § 2 of the VAT Code. Therefore
the limitation of deduction in article 45, § 2 of the VAT Code does not apply to the VAT imposed on toll charges
(Decision of 27 October 2005, nr. E.T. 103.391, www.fisconet.fgov.be).

Bringing in/transferring a department of a company

(2006/04/BE/VAT/18 WBTW/Ruling 500.355/totality/assets/MGO) by marc.govers@vat-house.com

The partial splitting of company A, whereby activity X is transferred to a new start-up company B, meets
legitimate financial or economic needs in the sense of the 1992 Income Tax Code. The common assets and
liabilities, which are the subject of the partial split and are to be allocated to the new start-up company are a
branch of activity that leads to a VAT exemption on the basis of articles 11 and 18, §3 of the VAT Code (Prior
Decision no. 500.355 of 19 January 2006, www.fisconet.fgov.be).

List of permit holders for direct sales

(2006/04/BE/VAT/18 WBTW/E.T. 102.595/permit/direct/sale/MGO) by marc.govers@vat-house.com

The tax authority has published a list of persons who hold a permit to apply the scheme for direct sales described
in Decision no. E.T. 102.595 of 19 June 2002, updated to 1 February 2006 (Informaties en Mededelingen (AOIF-
BTW), 1 February 2006, www.fisconet.fgov.be).

Request of VAT number in Belgium

(2006/06&07/BE/VAT/__/number/request/MGO) by marc.govers@vat-house.com

Information with regard to the request of a VAT number in Belgium when starting an activity can be found on:
http://fiscus.fgov.be/interfaoiffr/Identification_TVA/inleiding.htm

Co-liability of tax fraud advisors

(2006/06&07/BE/VAT/70, 73 WBTW/liability/fraud/advisor/van der Maelen/ Q.709/MGO) by marc.govers@vat-
house.com

Both the 1992 Income Tax Code (WIB 1992) and the VAT Code include two types of penal conditions, on the
one hand administrative penalties and on the other, criminal penalties. Violations of the conditions of the WIB
1992 and the VAT Code are penalised with an administrative fine as determined by articles 445 WIB 1992 and
70 to 73 of the VAT Code and the R.D.s that implement them. For income tax, a tax increase can also be applied
(art. 444, WIB 1992). These penalties are imposed on the taxpayers themselves if they do not meet certain
obligations, not on the accountant or bookkeeper. The holder of the mandate is, after all, considered to be acting
in the name and on behalf of the principal.

Besides these administrative penalties, however, both codes also include criminal penalties. The following incur
criminal penalties:
- a person who violates the conditions of the Code or the decrees that implement it, with the intent to deceive or
cause damage (art. 449 WIB 1992 and 73 WBTW)
- a person with the intent to carry out one of the crimes described in the first point, who commits falsity in
business or private documents, or who makes use of such a false document (art. 450, first part, WIB 1992 and
73bis, first part, WBTW)
- a person who, knowingly and wilfully issues a false certificate that may damage the interests of the Treasury or
of those who make use of such a certificate (art. 450, second part, WIB 1992 and 73bis, second part, WBTW).

These penalties apply to anyone – i.e. also an auditor, tax advisor or banker – who takes part in tax crimes as a
perpetrator, co-perpetrator or person who is jointly responsible. If such illegal practices are confirmed by an
official of the Federal Government Department of Finance in the exercise of his office, he must make a
reasonably justified complaint on the basis of article 29 of the Criminal Code, to the appropriate public prosecutor
(see also art. 460 WIB 1992 and 74 WBTW). If the Prosecution Council initiates proceedings, a prison sentence
or fine can be imposed on the accused. Moreover, the person exercising the profession of
accountant/bookkeeper etc. can be forbidden to practice this profession in any manner, directly or indirectly, for a
period of between three months and five years. Furthermore, if his decision merits it, the judge can order the
closure of institutions belonging to the company, organisation, group or business of which the convicted
accountant/bookkeeper is the head, a member or an employee, a period of between three months and five years
(art. 455, WIB 1992 and 73ter, WBTW).

When people are convicted as perpetrators or jointly responsible for the aforesaid crimes, they are also severally
liable for the payment of the evaded tax. Moreover, either as natural persons or as legal persons, they are
severally liable in civil law for the fines and costs resulting from the convictions made for the crimes in question,
which were pronounced against their principals or company leaders (art. 458, WIB 1992), against their
employees or directors, executives or liquidators (art. 73sexies WBTW).

Finally, on the basis of article 5, § 2, of the law of 22 April 1999 concerning the professional ethics of accountants
and tax consultants, the Minister of Finance can file a complaint against an accountant or tax consultant with the
Council of the Institute of Accountants and Tax Consultants (IAB).

Article 54, § 3, of the law of 22 April 1999 concerning the bookkeeping and tax professions also states that the
“High Council for Economic Professions” can file a complaint with the ethics committee of the Institute of
Accountants and Tax Consultants, the Institute of Company Auditors and the Professional Institute of
Recognised Bookkeepers and Tax Experts respectively, depending on the case, against one or more
accountants, company auditors, tax consultants, recognised bookkeepers or tax expert bookkeepers. It is
therefore essential for the criminal prosecution of tax evasion that the intention is to deceive or cause damage.
This intentional element must be judged on a case-by-case basis and cannot be guessed at on the basis of
general cases (Q&A, Chamber, 2005-2006, Q. no. 709 from Mr Van der Maelen on 29 March 2005, no. 105,
19226).

Application of Seeling judgement

(2006/06&07/BE/VAT/19, 33, 44 WBTW/Seeling/C-269/00/Q.924/Versnick/private/asset/MGO) by
marc.govers@vat-house.com

In its judgement of 8 May 2003 (case C-269/00, Wolfgang Seeling), as far as VAT is concerned, the European
Court of Justice gave its opinion on the case where the taxable person uses an immovable company asset for
both the economic activity in question and for the personal use of the taxable person. According to the Minister of
Finance, the Court envisaged the case where a taxable person’s assets can be divided into two clearly distinct
parts: private assets and company assets. This situation can only arise if the taxable person has the status of a
natural person. The goods obtained by a legal person can, after all, only belong to the business, since a legal
person does not have private assets. Moreover, the Court has clarified that the use of immovable company
assets by a taxable natural person who has fully included this property in the business and deducted the VAT
imposed on its acquisition, cannot be considered the equivalent of VAT-exempt use such as the leasing or rental
of immovable property. Consequently, under these circumstances, the use of the immovable property for the
private purposes of the taxable person is subject to VAT at the rate of 21% if this property is located in Belgium.
In the case where a taxable person makes immovable company property with the right to deduct available to a
member of staff or, if it is a taxable legal person, to an executive, director or partner, then this is a different
situation in VAT terms that is clearly not covered by the judgement in question. In that situation, a benefit arises
for the user concerned, even if the latter is not obliged to pay for it, and this benefit results from an employment
contract or the capacity of an executive, director or partner. Such provisions must be considered rental for
valuable consideration, which is exempted in accordance with article 44, § 3, 2° of the VAT Code. According to
the Minister of Finance, the administrative circular AOIF no. 5 of 31 January 2005 does not limit the scope of
application of this judgement in any way, instead providing a detailed clarification.

In application of article 33, 2° of the VAT Code (conversion of article 11 A (1)(c) of the Sixth VAT Directive into
Belgian law), the taxable basis of the use of goods belonging to the business for the taxable person’s private
use, as described in article 19, § 1 of the VAT Code (conversion of article 6(2) of the Sixth VAT Directive into
Belgian law), is the amount of expenditure made, if the full or partial right to deduct arose for those goods. The
amount of expenditure made that relate to the use of the goods for the taxable person’s private purposes must
be determined by the latter according to the standard rules, under the supervision of the tax authority. Taking into
account the legal assumption described in article 9, § 1 of R.D. no. 3 (conversion of article 20(2) of the Sixth VAT
Directive into Belgian law), on the basis of which the economic duration of use of company assets that take the
form of a building is set for VAT purposes at fifteen years, the amount of expenditure made by the taxable person
for private use of immovable company assets must correspond annual to one fifteenth of the price of the part of
the property used for private purposes. The Minister of Finance has provided the reminder that the European
Court of Justice has already stated as law several times that the conditions of the Sixth VAT Directive are
autonomous Community legal concepts that therefore should receive a definition at Community level. Testing
these conditions against other fiscal or non-fiscal branches of law is therefore not relevant (Q&A, Chamber,
2005-2006, Q. no. 924 from Mr Versnick on 22 September 2005, no. 105, 19247).

Audits of building values

(2006/06&07/BE/VAT/64 WBTW/building/value/van der Maelen/ Q.973/MGO) by marc.govers@vat-house.com

The Minister of Finance has provided the following figures concerning the audits carried out on building values
(art. 64, § 4 WBTW) for 2002, 2003 and 2004:

2002 2003 2004

Total number of building value audits 19 728 17 769 16 679

- of which productive audits 4 192 3 787 3 514
-- amounts collected (in EUR) 9 537 000 8 007 000 7 362 000

(Q&A, Chamber, 2005-2006, Q. no. 973 from Mr Van der Maelen on 8 November 2005, no. 105, 19269).

Gifts to recognised institutions

(2006/06&07/BE/VAT/12, 33, 42 WBTW/gift/recognised/institution/Q.987/Versnick/MGO) by marc.govers@vat-
house.com

If a taxable person withdraws goods from stock to give to a charity, this withdrawal is the equivalent of a taxable
supply by virtue of article 12, § 1, first part, 2°, of the VAT Code. It follows from the general principles governing
VAT that goods cannot be presented for consumption without VAT being charged, except for the cases where
the VAT Code provides an explicit exemption. However, on the basis of the same principle, goods that are not
presented for consumption because they are destroyed do not lead to VAT being imposed, unless by the original
VAT deducted on those goods being paid back. On the basis of article 33, 1° of the VAT Code, the VAT incurred
due to the withdrawal must be calculated on a taxable basis equal to the purchase price of the goods or similar
goods or, if there is no purchase price, the cost price. When determining the taxable basis, the state and age of
the goods at the point when they are withdrawn should be taken into account. This value is to be set by the
taxable person under supervision from the tax authority. Finally, it should not be forgotten that if the goods are to
be donated to a recognised organisation with a humanitarian, charitable or education purpose, they can be
exempted from VAT on the basis of article 42, § 3, first part, 8° of the VAT Code, on the condition that the
organisation exports these goods outside the European Union as part of the work for which it intends them.
Neither the VAT Code nor the decrees that implement it allow the Minister of Finance to derogate from the above
(Q&A, Chamber, 2005-2006, Q. no. 987 from Mr Versnick on 21 November 2005, no. 105, 19273).

VAT exemption for artistic performances

(2006/06&07/BE/VAT/44 WBTW/artist/performing/actor/exemption/Q.991/Pieters/MGO) by marc.govers@vat-
house.com

Since article 44, § 2, 8° of the VAT Code only covers the services rendered by a performing artist, the supply of a
statue by an artist is not in any way exempt from VAT. The supply of the statue by an artist can benefit from the
6% reduced VAT rate under the conditions of category XXI of table A of the annex to R.D. no. 20.

The services of an actor to the organiser of a theatre play are exempted from VAT on the basis of article 44, § 2,
8° of the VAT Code, irrelevant of that person’s capacity (natural or legal person). The services of a décor
designer or wig maker are not services by performing artists, however, because these persons do not
themselves take part in the performance of the play.

It is to be noted that if the activities of the performing artist are not exempted, then the 6% reduced rate can
apply in the circumstances described by category XXIX, item 2, of table A of the annex to R.D. no. 20. If the actor
in person organises the play, then his services (e.g. ticket sales) are exempted from VAT on the basis of article
44, § 2, 9° of the VAT Code, under the conditions stated in that article. For the application of the exemption, a
particular requirement is that the organiser is recognised by the appropriate authority and that the income
obtained from this activity are solely intended to cover its costs. In this context, it should be noted that running a
bar that is only accessible to the audience of the play is also exempted. However, the sale of CDs is taxed at the
standard VAT rate.

If a theatre bureau acts as an organiser of a play, the services of the theatre bureau are also exempted from
VAT on the basis of article 44, § 2, 9° of the VAT Code, under the conditions stated in that article. For the sake of
completeness, it should be noted that when the activities of a theatre play organiser are not exempted, the 6%
reduced VAT rate applies by means of applying category XXVIII of table A of the annex to R.D. no. 20.

Finally, neither the Belgian VAT Code nor the European regulations on which the VAT Code is based provide a
definition of the term “performing artist.” In order to guarantee the legal certainty of all parties involved, the tax
authority attempted to provide as accurate as possible a definition in Notice no. 13 of 19 November 1997, taking
into account the existing applicable administrative commentary that has come about over the years, in close
consultation with the sector involved. This administrative commentary is constantly updated as the applicable
jurisprudence evolves (Q&A, Chamber, 2005-2006, Q. no. 991 from Ms Pieters on 21 November 2005, no. 105,
19269).

Performing artists
(2006/06&07/BE/VAT/__/artist/performing/Q.1021/Pieters/MGO) by marc.govers@vat-house.com

As a result of various discussions between the advisors to the Minister of Finance, representatives of the sector
concerned and the tax authority, it has been decided that the date when the Ministerial Standpoint as reproduced
in answer to parliamentary question no. 865 of 29 June 2005 takes effect be postponed until 1 July 2006.
Administrative Decision no. E.T. 108 828 of 30 September 2005 is therefore to be adapted as appropriate. The
Minister of Finance has incidentally charged the tax authority with investigating how to guarantee that all the
parties involved in the sector receive fair treatment in terms of VAT (Q&A, Chamber, 2005-2006, Q. no. 1021
from Ms Pieters on 30 November 2005, no. 105, 19297).

Audits when a business ends

(2006/06&07/BE/VAT/12, 48, 76, 91 WBTW/audit/cease/activity/Q.1009/Pieters/MGO) by marc.govers@vat-
house.com

The status of a taxable person for VAT purposes is lost at the point when the taxable activity is definitively
ended. A self-employed person who stops his professional activity retains the status of a taxable person with a
view to liquidating his business. He does not lose this status until the point when liquidation of the business ends
and there are no more transactions to be carried out for which he incurs VAT. Up to this point, the person
concerned is still obliged to file periodic VAT returns, so that he can fulfil his obligations in terms of VAT payment
and exercise any remaining right to deduct. Due to the particular characteristics of ending a business, it is
justified for the tax authority to carry out a specific audit: the withdrawal from article 12, § 1, 5° of the VAT Code
or the revision described in article 48, § 2 of the VAT Code concerning any company assets used for the
purposes of the business activity must, after all, be supervised. In this case, the taxable person is free to ask for
an immediate audit for ending a business from the appropriate VAT office. It does of course require a sufficient
period for the officials charged with the investigation to check the justification of the application for a refund. No
reasonable legal deadline has been set for such audits and there are no specific regulations for such a deadline.
The VAT credit in the current account gives rise to interest when the VAT current account is closed, in
accordance with article 91, § 3, first part, 1° of the VAT Code. 0.8 % interest per month is legally incurred on the
sums to be paid back, to be calculated from the end of the period determined by article 76, § 1, first part, of the
VAT Code. The Senior Inspector and head of department for the VAT sector systematically devote themselves to
following up audits when a business ends (Q&A, Chamber, 2005-2006, Q. no. 1009 from Ms Pieters on 29
March 2005, no. 105, 19292).

VAT rate on burial urns

(2006/06&07/BE/VAT/Tab A, 1, RD20/E.T 110.516/redcued/rate/MGO) by marc.govers@vat-house.com

In accordance with category XXIII, item 1, of table A of the annex to R.D. no. 20, the supply of coffins is subject
to the 6% reduced VAT rate. For the sake of fairness, it will be accepted that from 1 January 2006 onwards, the
supply of a burial urn can also benefit from the 6% reduced VAT rate (Decision of 20 January 2006, no. E.T.
110.516, www.fisconet.fgov.be).

Draft law to amend the AWDA

(2006/06&07/BE/CUS/22-4CCC/supervision/warehouse/MGO) by marc.govers@vat-house.com

At the plenary sitting of the Chamber of People’s Representatives on 9 February 2006, the law was accepted to
amend article 22-4 of the General Customs and Excise Code (AWDA) of 18 July 1977, and to repeal certain legal
clauses concerning the security to be provided in connection with Customs warehouses, inward processing (the
suspension scheme) and treatment under Customs supervision. The draft amends the AWDA in terms of the
security to be provided for approval of the premises for temporary storage. It revokes the law on Customs
warehouses, which links the granting of a permit to manage a Customs warehouse or to use the Customs
warehouse system to the condition of providing security. It also suspends those R.D.s which prescribe the
security to be provided in the context of the economic Customs schemes for Customs warehouses, inward
processing (the suspension scheme) and treatment under Customs supervision.
The draft law has been passed to the Senate for further treatment.

Agents in the sale and rental of immovable property

(2006/06&07/BE/VAT/21 WBTW/agent/sale/rent/immovable/property/Q.1044/Lahaye-Battheu/MGO) by
marc.govers@vat-house.com

The problems of VAT imposition on agents’ services when selling or renting immovable property is familiar to the
tax authority. For the purposes of article 21, § 3, 1° of the VAT Code that converts article 9(2)(a) of the Sixth VAT
Directive, article 1, 9° of R.D. no. 5 limits its application, in terms of services linked to goods that are immovable
by nature, to the services of agents in the real estate sector, who intervene in the establishment or transfer of
rights of ownership or use to property that is immovable by nature and located outside the European Union. It
must be mentioned that this conversion into Belgian law does not match the non-limitative wording of the
Community clause, and leads to cases of double or non-imposition of VAT. For these reasons, an amendment to
the law is being prepared to exclude the application of article 21, § 3, 8° of the VAT Code in this case, and to
have the services of estate agents exclusively determined by article 21, § 3, 1° of the VAT Code. R.D. no. 5 must
also be amended to get rid of the inappropriate reference to a location outside the European Union. If double
taxation occurs in practice in the meantime, the tax authority will investigate these individual cases and find an
ad hoc solution to avoid this double taxation (Q&A, Chamber, 2005-2006, Q. no. 1044 from Ms Lahaye-Battheu
on 20 December 2005, no. 106, 19704).

VAT rate on IT material

(2006/06&07/BE/VAT/12 WBTW/IT/standard/rate/Q.1063/Deseyn/MGO) by marc.govers@vat-house.com

Article 12(3)(a) of the Sixth VT Directive states that Member States must apply a single, standard VAT rate that
may not be any lower than 15%. Moreover, the Member States may apply one or two reduced VAT rates to the
categories of goods and services stated in Annex H to the Sixth VAT Directive. IT material and services are not
included in this annex, and therefore it is not possible to apply a reduced rate to these goods and services.

The standard VAT rate applicable to the goods and services in question in the neighbouring countries is:
- The Netherlands: 19%
- Germany: 16% (19% from 1 January 2007)
- Luxemburg: 15%
- France: 19.6%.

A difference in the VAT rate does not normally lead to distortions of competition, putting Belgian companies at
disadvantage. Purchases by Belgian companies in other European Member States are, after all, carried out
theoretically exempt from VAT, and the products are finally taxed according to the normal rules at the VAT rate
applicable in the Member State where they are sold to the consumer. The European Commission has developed
a proposed directive to simplify and rationalise Annex H of the Sixth VAT Directive. However, it does not include
IT material and services.

Finally, Directive 2002/38/EC on services provided electronically states that these services are to be subjected to
the standard VAT rate. A list of examples of such services is included as Annex L. It states the following:
1.Website supply, web-hosting, distance maintenance of programmes and equipment.
2.Supply of software and updating thereof.
3.Supply of images, text and information, and making databases available.
4.Supply of music, films and games, including games of chance and gambling games, and of political, cultural,
artistic, sporting, scientific and entertainment broadcasts and events.
5.Supply of distance teaching.
(Q&A, Chamber, 2005-2006, Q. no. 1063 from Mr Deseyn on 11 January 2006, no. 106, 19705).

Exchange of information between Belgium and other countries

(2006/06&07/BE/VAT/12 WBTW/IT/mutual/assistance/cooperation/Q.1050/Van der Maelen/MGO) by
marc.govers@vat-house.com

The tax authority will make bilateral agreements with the countries that Belgian companies trade with most. In the
knowledge that the fight against VAT circuits needs a swift and efficient approach, the bilateral agreements
supported by article 46 of Regulation no.1798/2003 of 7 October 2003, concerning administrative co-operation
for VAT, will essentially contain a mutual undertaking to respond immediately to requests for administrative co-
operation. On this subject, the plan is for a minimal respect or even a restriction of the deadlines in article 8 of
this regulation. The administrative arrangements with France (10 July 2002), Italy (11 July 1997), the
Netherlands (3 June 1998 and 4 February 2004) and the Ukraine (17 March 2003), do not contain such
deadlines (Q&A, Chamber, 2005-2006, Q. no. 1050 from Mr Van der Maelen on 23 December 2005, no. 107,
19928).

Language teaching
(2006/06&07/BE/VAT/44 WBTW/language/classes/Q.1061/Wathelet /MGO) by marc.govers@vat-house.com

The language teaching exempted on the basis of article 44, § 2, 4° of the VAT Code must be understood in the
same sense as the everyday use of the term, i.e. any method used to learn and practice a language. The
exemption includes every form of language teaching, irrelevant of the legal status of the service provider, the
intensity of the services rendered or whether or not they are part of a normal cycle of lessons. The fact that some
subjects at a private school are taught in a language that is not the pupils’ mother tongue is not sufficient to
classify these lessons as language education services, assuming these are lessons taught as part of normal
school education. This type of education does benefit from the exemption if it is provided for a period
corresponding to a school or academic year, including a pedagogic programme and exams to obtain a
qualification or certificate. In the current state of the law, as a result of the destruction by the Council of State of
the administrative notice that commented on the aforesaid legal stipulation, the legal form of the service provider
(non-profit organisation, trading company etc.) has no influence on this matter (Q&A, Chamber, 2005-2006, Q.
no. 1061 from Mr Wathelet on 10 January 2006, no. 107, 19929).

Electronic Customs
(2006/08&09/BE/CUS/__/Sadbel/NCTS/electronic/MGO) by marc.govers@vat-house.com

The Customs and Excise authority has an automated system for the electronic processing of import, export and
through transport returns, summary reports, incoming sea and air transport manifests and storage in type B
warehouses. This system is called Sadbel, an acronym for ‘system for automatic de-customisation in Belgium
and Luxembourg.’ The NCTS (“new computerised transit system”) is integrated into it. The import duty tariffs,
Tarbel, are also automated and updated daily. The system can be accessed through the website. If the tests go
well, Sadbel will be replaced by PLDA, paperless Customs and Excise, in September 2006. This system will be
introduced in three parts. In the first phase of the first part, all the Sadbel applications will be made available
using PLDA. In the second phase, the notion of “pre-notification,” and the extension of the goods compatibility
systems to include export and other means of transportation will be effected. This phase will be operational from
March 2007. The second part will extend the risk analysis system, and the third part will automate the filing and
treatment of Customs permits, file management and correspondence. These parts will be operational in the
middle of June 2007.

Besides this, are number of projects are underway to support the Authority’s work. European co-operation is in
effect at three levels: a steering group via the Customs Policy Group, the co-ordination of all operational aspects
through the Electronic Customs Group and preparatory activities under Customs 2007. On the basis of this
structure, the plan is to create thorough co-operation between the Member States and the European
Commission. The Customs and Excise Authority now once again has a complete, stable and fast NCTS. The
unavailability of this system in 2005 was due to unexpected technical problems and the Authority had to fall back
on an emergency procedure. The chance of temporary problems is high because of the complexity of the system
(Verbal question, Chamber, Committee for Finance and the Budget, 7 March, 2006, COM 873, 2).

Role of Customs exporters in cases of Customs debt – comparison with the Netherlands
(2006/08&09/BE/CUS/5 CCC/exporter/debt/Q.1066/Van Campenhout/MGO) by marc.govers@vat-house.com

The right of representation for Customs matters is determined by article 5 of the Community Customs Code. This
article states that any person can be represented towards the Customs Authority for the fulfilment of Customs
formalities.

According to the Community Customs Code, this representation can be:

- direct, if the representative acts in the name and on behalf of another person,
- or indirect, if the representative acts in his own name, but on behalf of another person.

The Community Customs Code authorises the Member States to limit the right of representation to the Customs
Commissioner. In implementation of, and in accordance with the Community Customs Code, article 127 of the
General Law on Customs and Excise states that:
1. the right of representation is reserved for the person recognised by the Customs and Excise authority as a
Customs exporter,
2. the Customs exporter shall act in his own name and on behalf of third parties.

In Belgium therefore, Customs exporters represent their clients towards the Customs and Excise Authority
indirectly. As for the Customs debt, this implies on the one hand that the Customs and Excise Authority has two
debtors, on the basis of Community legislation, who are severally responsible for payment of the import duties
owed: the Customs exporter and this person’s principal. On the other hand, the Customs exporter is made to
bear responsibility for the declarations he files. In cases where the Customs debt is not paid voluntarily, both
parties are approached. Payment by one of them exonerates the other.

In the Netherlands, Customs exporters can represent their clients directly. In this way, the Netherlands put a stop
to the growing professional practice in the country of Customs exporters acting in their own name and on their
own behalf. This means that the position of the Customs exporter in the Netherlands has become noticeably less
advantageous. However, it should be noted that direct representation in the Netherlands is no longer limited to
Customs exporters, and instead anyone can act as a direct representative. The task of Customs exporters in the
Netherlands has therefore partly been taken over by the many other intermediaries in trade circulation.

Since the legal basis for direct representation comes from the Community Customs Code, this system can be
implemented in Belgium. Direct representation has its consequences, however: for example, all the IT
applications used by companies would need technical adaptations. As for the Customs and Excise authority,
neither the current automated system nor PLDA (“Paperless Customs & Excise,” which will become operational
in the course of 2006) are prepared for this type of representation. Direct representation would inevitably require
heavy investment, both for the sector and the authorities.

On 13 December 2005, a first discussion was held between officials of the Customs and Excise Authority and
members of the Confederation of Exporters of Belgium (CEB/VEA) was held to explore the possibility of allowing
direct representation in Belgium. During this constructive meeting, it became clear that both parties are aware of
the advantages and disadvantages of the direct representation system. As a result of that meeting, it was
decided that the sector would investigate if there is a real need among exporters for the introduction of direct
representation, and that a multilateral study would be dedicated to the advantages, disadvantages and
consequences of this form of representation (Q&A, Chamber, 2005-2006, Q. no. 1066 from Mr Van Campenhout
of 17 January 2006, no. 109, 20402).

Application of the company centres notice

(2006/08&09/BE/VAT/__/company/service/center/Q.1091/Van der Maelen/MGO) by marc.govers@vat-
house.com

Although the new VAT system that has applied to company centres and service centres since 1 January 2006
was developed in consultation with representatives of the sector concerned, the change to the tax authority's
standpoint was primarily motivated by developments in national and European jurisprudence. Notice no.
39/2005, published by the tax authority in this context, allows a distinction to be made between taxable
transactions by company centres and service centres on the one hand, and VAT-exempt immovable leasing
(plus auxiliary services, where applicable) on the other. In order for the flat-rate price to be taxed as a whole, a
minimum number of services must be offered that are included in this price. Offering these services as a
package is absolutely necessary for the activities of the service centre to be distinguished from exempt
immovable leasing. The Minister of Finance has given a reminder, moreover, that activities carried out by
company centres and service centres are considered to be continuing services that are paid for with a series of
instalments or payments, on which VAT is incurred at the end of each period to which the payment pertains.
Thus the new system applies to services provided by company centres and service centres on which the VAT is
incurred from 1 January 2006 onwards, irrelevant of when the contract was signed. In order to ensure equal
treatment of all the parties involved, and with a view to the uniform and transparent application on the new VAT
system, a proposal for company centres and service centres to derogate from the above principles cannot be
considered. (Q&A, Chamber, 2005-2006, Q. no. 1091 from Mr Van der Maelen of 17 January 2006, no. 109,
20410).

Public authorities and VAT

(2006/08&09/BE/VAT/__/public/authority/deduction/Q.1100/Schoofs/MGO) by marc.govers@vat-house.com

It is correct that certain public bodies regularly resort to certain tax techniques with the aim of being able to
deduct the VAT imposed on their investments and expenses. Such techniques, which initially seem to be an
inappropriate application of the VAT rules, are intended to exploit the right to deduct input VAT to the maximum.
However if the inappropriate applications are irregular, it goes without saying that the required corrections will be
made. However, such legal constructions are regularly brought to the tax authority or the prior decisions
department, and are clearly only accepted if they do not contain any irregularities with regard to the VAT
regulations. (Q&A, Chamber, 2005-2006, Q. no. 1100 from Mr Schoofs of 23 January 2006, no. 110, 20581).

Auditing of construction value

(2006/08&09/BE/VAT/36, 59, 64 WBTW/construction/value/Q.1066/Pieters/MGO) by marc.govers@vat-
house.com

For work on immovable property supplied by a taxable person; related to the construction of a building, article 36,
§1, b) of the VAT Code states that the taxable basis may be no less than the normal value of the service. Article
28 of the VAT Code does not apply in this case. Article 32, second part, of the VAT code describes the normal
value as the price that can be obtained in Belgium for that work, in free competition between two independent
parties. In order to determine the normal value, article 59, § 2 of the VAT Code authorises both the official
indicated by the Minister of Finance and the taxable person concerned to request an estimate in accordance with
the procedure stated in articles 14 to 21 of R.D. no. 15. The application of the aforesaid legal conditions does not
affect the private statutory rights of the parties who have signed an agreement for work on immovable property.
On the one hand, they are to be considered measures allowing the State to impose tax on the owner of a newly
constructed building, and on the other hand, as a control measure obliging both the State and the owner
concerned to test the price of work on immovable property against the legally defined concept of a normal value
described above. If, when applying these control measures, the tax authority sets the normal value at a higher
amount than the prices agreed according to the contract, this does not mean that this contract is to be
considered false. It is not impossible, after all, that the principal was able to obtain a better price than the normal
prices in that area. Moreover, article 64, § 4 of the VAT Code sets an assumption that all newly constructed
buildings are considered to be supplied by taxable persons in fulfilment of one or more service transactions
linked to work on immovable property. This assumption means that in theory, there must be invoices for every
newly constructed building, amounting to the normal value of the services provided. However this is a juris
tantum assumption, meaning that the owner of the building is entitled to prove that no service provision relating
to work on immovable property took place or that the service provision consisted merely of the provision of work
without the supply of materials. Proof that work was carried out on immovable property to a certain extent, not in
the context of a taxable transaction, can be provided by the owner by any evidence accepted in common law, by
demonstrating that the owner carried out the work personally or that other people did the work free of charge.

To the extent that proof to the contrary is provided, or if it can be demonstrated that materials were bought
directly by the owner and so were not included in the provision of a service, then depending on the case, the
value of the work and the materials used, or the value of the materials alone, will be deducted from the normal
value in question. This means, that if the normal value of a building is estimated for practical reasons, including
these materials, then the normal value and not their real cost price must be deducted from that estimate. This
obviously means that the owner/constructor must prove that he bought the materials at prices lower than the
norm. This proof can, for example, be provided by invoices showing considerable discounts or by the particular
circumstances of the case (e.g. a principal who works in the building trade, professional relationships etc.) A
family relationship between the principal and the supplier of the building materials is not considered to be such a
circumstance. Finally, if re-used materials are incorporated, the value of similar new materials is to be taken into
consideration (Q&A, Chamber, 2005-2006, Q. no. 1066 from Ms Pieters of 23 January 2006, no. 110, 20582).

Free meals / free provision of motor vehicle

(2006/08&09/BE/VAT/19 WBTWfree/meal/vehicle/Q.1105/Van Biesen/MGO) by marc.govers@vat-house.com

The case where a taxable person provides a vehicle to a member of staff, who uses it for private purposes,
without requiring a rental price to be paid, is explicitly regulated by article 19, § 1 of the VAT Code. In that case,
VAT is incurred on expenditure made (art. 33, 2° VAT Code). Since the expenditure made on behalf of the
taxable person correspond in reality to the benefit in kind that is determined for the purposes of income tax, the
tax authority provided a special way of calculating the taxable basis for VAT in notice no. 4 of 9 May 1996. This
optional calculation method guarantees transparent and uniform tax imposition, and takes into account the
conditions of the judgement by the European Court of Justice on 25 May 1993, in case C-193/91, Mohsche, on
the basis of which only expenditure that has led to the right to deduct input tax is included in the taxable basis.

However, article 19, § 1 of the VAT Code, which particularly envisages the long-term use of company assets
belonging to a taxable person, does not apply in the case of a taxable person who provides free food and drink in
the company canteen for the use of staff, since this situation involves goods that are consumed upon first use.
The circumstance that this activity is not paid for directly in any way does not automatically mean that it is free.
After all, only staff, i.e. those linked to the employer by some kind of contract, to the exclusion of all other
persons, can use the canteen. Thus this use is inherent to the contracts signed, of which it is usually a tacit
consequence. The provision of food and drink, apparently free of charge, in a company canteen is therefore
considered to be a service for valuable consideration covered by article 18, § 1, second part, 11° of the VAT
Code. The taxable basis of the VAT owed is the benefit in kind determined for the imposition of income tax.

By way of an experiment, the tax authority will not demand that article 19, § 1 of the VAT Code be applied if the
price or, if there is no price, the normal value per usual trading unit, is less than 250 EUR. It goes without saying
that in this case, the original right to deduct is not affected (Q&A, Chamber, 2005-2006, Q. no. 1105from Mr Van
Biesen of 23 January 2006, no. 110, 20585).

Extension of INTERVAT
(2006/08&09/BE/VAT/__/electronic/return/INTERVAT/MGO) by marc.govers@vat-house.com

It will soon be possible to file VAT returns in XML format using the INTERVAT application. The tax authority has
published the necessary information for this on its website
(http://minfin.fgov.be/portail1/nl/intervat/welcomeintervatnl.html).

In the future, it will be possible to:

- use an electronic identity card to gain access to the application and sign the VAT return
- call up the balance of the VAT current account
- get a summary of the VAT returns filed.

VAT imposed on the costs of managing pension funds

(2006/08&09/BE/VAT/E.T.110.502/management/pesion/fund/MGO) by marc.govers@vat-house.com

The benefits obtained by the staff members of a pension fund that was set up for their benefit by the company
that employs them, are social benefits of a collective nature. The VAT imposed on costs that are necessary for
the maintenance of this fund is therefore deductible on behalf of this company according to the normal rules
(Decision of 9 February 2006, no. E.T. 110.502, www.fisconet.fgov.be).

Treatment of green energy certificates

(2006/08&09/BE/VAT/44 WBTW/E.T.110.775/green/energy/certificate/exemption/MGO) by marc.govers@vat-
house.com

In order to meet the directives on renewable energy sources as imposed by the European Union, Belgium has
opted to introduce a minimum norm for renewable energy sources, controlled by means of green energy
certificates. Each electricity supplier within this system will be obliged to derive a minimum proportion of the
electricity it supplies to end users from renewable sources. This means that electricity suppliers will be obliged,
and an administrative fine will be imposed for each missing certificate, so that this obligation will be followed up
and enforced. Green energy certificates for the production of green energy will be allocated to the producer by
the regulatory body, and can be traded freely.
This means that it is legal in Belgium for electricity suppliers to reach the imposed norm by buying green energy
certificates although they do not produce green energy.
The trade in green energy certificates is a parallel market, separate from the sale of electricity. In terms of VAT,
green energy certificates are to be considered documents that can be traded (but not shares or bonds), and they
are covered by the exemption in article 44, § 3, 10° of the VAT Code. The transfer of green energy certificates is
therefore exempt from VAT. However, storage and management services are taxable on the basis of the
exception to article 44, § 3, 10° of the VAT Code. As for the deduction rules, it is recommended that the rule of
effective use in article 46, § 2 of the VAT Code be applied, in order to be able to deduct fully the VAT imposed on
goods and services acquired with a view to the production and sale of electricity. Only the VAT imposed on costs
that are fully and exclusively related to the trade in green energy certificates is not deductible. Businesses
(banks, stock exchange companies, investment companies etc.) who might specialize in the purchase and sale
of green energy certificates must however be considered exempt taxable persons for this activity. The normal
rules of either article 46, § 1, or article 46, § 2, of the VAT Code must be applied. This material is currently the
subject of discussions at EU level. Until a definitive answer results from these discussions, the current standpoint
will continue to apply (Decision of 28 February 2006, nr. E.T. 110.775, www.fisconet.fgov.be).

VAT obligations of psychotherapists

(2006/08&09/BE/VAT/44 WBTW/psychotherapist/exemption/service/medical/MGO) by marc.govers@vat-
house.com

The Minister of Finance has no objections in terms of content to the exemption in article 44, § 1, 2° of the VAT
Code being extended to include the services of psychologists and psychotherapists, as well as to certain
practitioners of non-conventional forms of medicinal treatment. Before this article can be extended, however, it is
necessary that all the conditions for exercising these practices are specified, more precisely the practices linked
to the registration of recognised practitioners and the list of permitted and not permitted acts and the required
training. The Minister of Social Affairs and Pubic Health has confirmed that work is being done to draw up a pre-
draft of a law to regulate the practice of the mental health professions. As soon as there is such a text to provide
a framework for the elements of the profession, it will be possible to proceed to applying the same principles of
VAT as those that apply to other acts carried out by other practitioners (Verbal question, Chamber, Committee
for Finance and the Budget, 21 February 2006, COM 861, 21).

Change of address for the scanning centre in Ghent

(2006/08&09/BE/VAT/__ /address/scanning/Q.1046/Tommelein/MGO) by marc.govers@vat-house.com

Since 12 October 2005, the scanning centre in Ghent has been located at the following address: Zuiderpoort,
Blok B, Gaston Crommenlaan 6, bus 001, 9050 Ghent (Ledeberg). Correspondence sent to the old address is
automatically forwarded to the new address by the post office until 30 April 2006. What is more, the letter box at
the old address was emptied every day between the move and 30 November 2005 by the scanning centre staff,
since the new address is close by. Since then, any correspondence that still arrives at the old address is
transferred to the new address by Economat, which is responsible for the building. This building is still used by
the Federal Government Department of Finance. Besides the information provided on the portal site of the
Federal Department of Finance and the tax authority intranet, the departments were informed of this change of
address by e-mail. Moreover, the VAT payers concerned received a circular about this change. As a rule, no fine
is incurred for late filing of a VAT return, as long as it is filed by the tenth day following the month in which it
should legally be filed. If a VAT return is received after this date as a result of the change of address of the
scanning centre, this can only be exceptional and purely coincidental, due to the measures taken. In this light,
and on the basis of concrete elements that can be demonstrated, the tax authority will investigate any requests it
receives for a reduction in the fines for late filing, with the necessary understanding. Any refunds of tax credit will
be dealt with by the stated deadline (Q&A, Chamber, 2005-2006, Q. no. 1046 from Mr Tommelein on 21
December 2005, nr. 108, 20182).

VAT rate on manure

(2006/08&09/BE/VAT/__ /manure/rate/Q.1098/Muylle/MGO) by marc.govers@vat-house.com

In cases where a contractor collects manure from a farmer and stores it, and later signs a contract of his own to
spread it, the service consisting of collecting the manure to be stored temporarily by the person who collects it
cannot be considered an agricultural service that benefits from the 6% reduced VAT rate. The service consisting
of spreading manure on agricultural land can, however, be considered an agricultural service that benefits from
the 6% reduced VAT rate. The Federal Government Department of Finance, and the Federal Government
Department of Mobility and Transport each have their own regulations, which do not necessarily have the same
intentions. The classification of the above service in VAT terms does not imply any classification for the Federal
Government Department of Mobility and Transport, and vice versa (Q&A, Chamber, 2005-2006, Q. no. 1098
from Ms Muylle on 19 January 2006, no. 108, 20186).

Local sewers
(2006/08&09/BE/VAT/__ /local/sewer/deduction/Q.1112/Casaer/MGO) by marc.govers@vat-house.com

The problems of local sewers and the VAT to be deducted are the subject of a consultation between the advisors
to the Minister of Finance and the tax authority. This consultation will be held in the light of the judgement by the
European Court of Justice in the Waterschap Zeeuws Vlaanderen case on 2 June 2005. The results will be
published by the tax authority without delay, through the tax documentation database Fisconet (Q&A, Chamber,
2005-2006, Q. no. 1112 from Mr Casaer on 30 January 2006, no. 108, 20189).

Filing the VAT listing electronically

(2006/08&09/BE/VAT/__ /sales/list/recapitulative/statement/MGO) by marc.govers@vat-house.com

Belgian companies are obliged to file a list before 31 March each year, containing the taxable recipients to whom
they supplied goods or services in the course of the previous calendar year.

VAT LIST allows bookkeeping bureaus and accountants to file their annual customer listings electronically. The
professional organisations IAB-IEC and BIBF-IPCF were called upon to set up this public-private partnership,
both of which took an active part in the practical development of the project. These were its guiding principles:
- company certainty must be guaranteed
- the system must be safe
- the system is mainly intended for professional users.
On the basis of these requirements and earlier experience, a number of decisions were made in conceptual and
technical terms:
- pure EDI technology was used
- reports were created in XML format (eXtensible Markup Language)
- the application works by mail on a secure network (X-400)
- a registration procedure is used to identify the persons filing listings
- each time a dispatch is sent, the tax authority provides a proof of receipt
- a dispatch can contain up to 99 999 reports
- the entire procedure must be as automatic as possible
- no digital signature is used (for the time being).

To begin with, the Federal Department of Finance hopes to bring the current EDIVAT users into the VAT LIST
project. In a later phase, other businesses will also be offered the opportunity to use VAT LIST.

Change to the timing of PLDA

(2006/08&09/BE/CUS/__ /sadbel/plda/MGO) by marc.govers@vat-house.com

The timing for replacing SADBEL with PLDA has been revised. The current plan is for an initial version
(“Release1Light”) to be available on 1 June 2006 and operational in the course of September 2006 if the tests go
well. A more comprehensive version (“Release1Full”) will be tested from 2 November 2006 onwards, and
become operational on 1 March 2007. The complete PLDA application is expected to enter the test phase on 13
April 2007 and become operational on 1 July 2007.

Transfer of company supplement rights

(2006/08&09/BE/VAT/44 WBTW/E.T.110.607/support/subsidy/right/transfer/MGO) by marc.govers@vat-
house.com

The two most important characteristics of the reform to the Common Agricultural Policy (CAP) in 2003 were the
disconnection of direct support to producers and the introduction of the company supplement scheme (see
Regulation no. 1782/2003 of 29 September 2003 confirming Community regulations for schemes to provide
direct support in the context of the Common Agricultural Policy and confirming certain support schemes for
farmers, and including amendments to various previous Regulations). “Disconnection” must be understood to
mean that the amounts of support paid to the producers are no longer linked to the surface area of cultivated
land in terms of production or the size of the animal herd, but instead are fully dependent on the type of
production. As for the company supplement rights, this means income support for farmers that is calculated in
terms of the amounts of direct support received during the reference period of 2000-2002, and the number of
hectares that give rise to the right to such support. Farmers who have supplement rights have to apply for them
each year. This means that they only receive payment if each right they have is linked to a hectare eligible for a
subsidy, i.e. any agricultural land at all owned by the company, in the form of building land or permanent
grassland. In VAT terms, regional governments must not consider the payment of these rights to be payment in
return for a transaction covered by article 2 of the VAT Code, and no VAT is incurred. The definitive or temporary
transfer of these supplement rights between two agricultural companies must be considered to be the transfer of
a debt claim, which is exempt from VAT in accordance with article 44, § 3, 7° of the VAT Code (Decision of 3
February 2006, no. E.T. 110.607, www.fisconet.fgov.be).

Tax regularisation
(2006/10/BE/VAT/__/regularisation/MGO) by marc.govers@vat-house.com

A Royal Decree of 8 March 2006 was published in the Belgian Official Gazette on 15 March 2006. It contained
the foundation of the “Contact point for regularisations” at the Federal Government Department of Finance. This
contact point is in fact located at the department of prior decisions (see below).

A Royal Decree of 9 March 2006 was also published in the Belgian Official Gazette on 15 March 2006. It
provided the model form to be used for tax regularisation.

Local sewers
(2006/10/BE/VAT/__/C-382/02/sewerage/waterMGO) by marc.govers@vat-house.com

If local authorities already had the status of taxable persons for the supply of drinking water, the obligation to
provide sewerage will be a burden of their taxable activity from the date in question. Therefore the VAT on the
costs they incur from that date onwards that are linked to sewerage, is deductible. Local authorities that do not
deal with the supply of drinking water themselves will become taxable persons for the collection and disposal of
wastewater if these services can be considered transport services for valuable consideration provided to a third
party, e.g. a drinking water company. They will obtain the capacity of taxable persons from the point when the
agreement with the drinking water company for the transportation of wastewater is effectively signed. As for the
revision of the VAT deduction on company assets, in this case the sewer infrastructure, to the advantage of local
authorities: the jurisprudence of the European Court of Justice in the Waterschap Zeeuws-Vlaanderen case
(case C-378/02 of 2 June 2005) must be taken into account here. On the basis of this judgement, a person who
has bought or acquired goods in the capacity of a non-taxable person and then becomes a taxable person, is not
allowed to deduct the VAT imposed on the acquisition of those goods. This judgement is to be applied from 1
July 2005 onwards. Local authorities who became taxable persons before 1 July 2005 can still call upon the
earlier administrative standpoint that allowed VAT payers the possibility to deduct part of the VAT imposed on
obtaining company assets purchased or acquired before they gained taxable status. Local authorities who
became taxable persons after 1 July 2005 cannot therefore gain any revision in their advantage of the VAT
imposed on the company assets they purchased before they became VAT payers. The inspection offices will
receive instructions to this effect. The Minister of Finance is of the opinion that this solution is a correct
application of the judgement of 1 July 2005. All the inspection offices have already received general instructions.
They still have the freedom to research individual files on a case by case basis. (Verbal question, Senate,
Plenary sitting, 16 March 2006, Handelingen, 3-154, 25).

Inspections of building value

(2006/10/BE/VAT/64 WBTW/valuation/building/value/Q.1104/Annemans) by marc.govers@vat-house.com

The tax authority does not have the data concerning the number of building permits granted. Nor does it have
statistical data on the number of returns filed in accordance with article 64, § 4 of the VAT Code. In the context of
the inspection duties of the tax authority, internal guidelines have been drawn up to set the normal building value,
whose application can lead to a proposal for an out-of-court settlement of the case. With regard to houses built
with common building materials, no notable differences have been found between the contract prices applied in
all the regions of the country, meaning that the same normal values can be applied across the country when
inspecting the taxable basis of work on immovable property linked to the construction of such housing. This fact
can be partly explained by the fact that the activity of contractors is not limited to a single region. Moreover, the
VAT officials have been extremely moderate in setting the normal construction price. If a principal does not agree
with the tax authority’s estimate, however, he has the right to make his objections known. Moreover, the demand
originally made is not infrequently reduced or rejected once the tax authority has been made aware of
information that was not clear from the documents submitted. Finally, it must be stated that the average yield
from the inspection is small in relation to the total VAT receipts from the housing construction sector. Under such
circumstances, it can be stated that the regulations concerning the normal building value do not deviate in a
general or an absolute manner from the normal taxable basis, but they do have a preventative effect in the fight
against tax fraud, and in certain cases of suspected tax fraud they have a corrective effect (Q&A, Chamber,
2005-2006, Q. no. 1104 from Mr Annemans on 23 January 2006, no. 111, 20932).

VAT rate on air conditioning

(2006/10/BE/VAT/20 RD1/ET.110.286/rate/air/conditioning) by marc.govers@vat-house.com

The classification of air improvement systems in rooms where people stay, in accordance with the decision of 14
July 1997, no. E.T.84.567 (BTW-Rev., nr. 131, 1113), has been re-investigated in the light of changes in
jurisdiction and the jurisprudence derived from it. The investigation showed that the standpoint explained in point
(3), first part, (2) of the above decision can no longer be defended. This means, therefore, that the supply and
installation of such systems, of the split-system type, for air improvement in rooms where people stay, is covered
by article 20, § 2, of R.D. no. 1. Thus this transaction is eligible for the application of the reduced VAT rates in the
immovable property sector, as long as the other conditions of this application are met (Decision of 10 March
2006, no. E.T. 110.286, www.fisconet.fgov.be).

Refunding the credit balance of a special account when the VAT payer’s current account is closed definitively
(2006/10/BE/VAT/8 RD24/82 WBTW/refund/credit) by marc.govers@vat-house.com

The balance of a VAT payer’s special account when their current account is closed definitively is – conditionally
upon the supervision of its accuracy that may be required – theoretically always refunded, even if the VAT payer
has not requested the refund (art. 8, § 1, fifth and sixth parts, of R.D. no. 24 and articles 82, second part and 12,
§ 2, of R.D. no. 4). One cannot demand that VAT payers must ask for the officially provided refund themselves,
or in other words consider their debt claim. Therefore article 82 of the VAT Code does not apply. Given the lack
of a special derogation for all debt claims that do not need to be considered, i.e. debt claims settled officially,
article 100, 3° of the co-ordinated laws of National Accounting therefore applies. In accordance with this
condition, the debt claims resulting from the definitive closure of the current account expire if they are not
ordained within a period of 10 years to be calculated from 1 January of the year in which they arise, more
specifically the year of closure of this account (Decision of 3 March 2006, nr. E.T. 110.131,
www.fisconet.fgov.be).

Scope of application of the exemption in article 44, § 2, 1° of the VAT Code

(2006/10/BE/VAT/44 WBTW/ET.110.410/C-394/04/exemption/telephone/television/hospital) by
marc.govers@vat-house.com

In the judgement on 1 December 2005 of the connected cases C-394/04 and 395/04, Diagnostiko & Therapeftiko
Kentro Athinon-Ygeia AE, the European Court of Justice declared as law that the supply of telephone services
and the rental of television sets to hospital patients by persons covered by article 13A(1)(b) of the Sixth VAT
Directive (converted into Belgian law in art. 44, § 2, 1° of the VAT Code) and the supply by such persons of beds
and meals to those accompanying the said patients, are not as a rule activities closely related to hospital and
medical care in the sense of this clause. According to the European Court of Justice, this situation is only
different if these activities are essential to achieving the therapeutic aims of hospital and medical care and not
primarily intended to provide extra income to the person who provides them by making transactions that are
carried out in direct competition with those of commercial companies subject to value added tax. However, it
must be stated that the strict application of the rules as required by the European Court of Justice could lead to
various practical problems for both the tax authority and for hospitals. Furthermore, given that the non-taxation of
these transactions is not of a nature that causes real distortions of competition with respect to economic
operators providing equivalent services (telephone providers, restaurants, hotels etc.), the exemption in article
44, § 2, 1°, of the VAT Code can be retained for all the transactions covered by this judgement (Decision of 23
February 2006, no. E.T. 110.410, www.fisconet.fgov.be).

Customs value
(2006/10/BE/CUS/RUL 600.033/import/agent/value) by marc.govers@vat-house.com

Company Y NV imports goods manufactured by company X outside the EU. Y NV belongs to the same group as
X and acts as an independent commissioned agent for X in the EU. Given the circumstances in which the
imported goods are traded, it was decided that the price to be paid to X by Y NV (the transaction value) could be
used as a basis to determine the Customs value of the imported goods. This price is to be based on the (re)sale
price charged by Y NV to buyers established in the EU and will be reduced by certain cost price elements linked
to storage, treatment and transportation of the goods after they have been brought into the Customs territory of
the European Union (Prior Decision of 9 March 2006, no. 600.033, www.fisconet.fgov.be).

Address of the prior decision department

(2006/10/BE/VAT/CUS/__/pirior/decision/address) by marc.govers@vat-house.com

From 3 April 3 2006, the prior decision department will be located at the following address:
FOD Financiën
Dienst Voorafgaande Beslissingen
Maria-Theresiastraat 1
1000 Brussels
e-mail: dvbsda@minfin.fed.be

Obligatory electronic filing of periodic VAT return / abolition of the paper journal of receipts
(2006/11/BE/VAT/__/return/electronic/cash/receipts/MGO) by marc.govers@vat-house.com

On 22 March 2006, the Cabinet approved a number of specific simplification measures for businesses. The
proposed drafts of a Royal Decree provide for the abolition of the paper journal of receipts and the further
simplification of the electronic VAT return.

1. Obligatory electronic VAT return to be introduced gradually

As is already the case in the Netherlands, the obligatory electronic VAT return will be gradually introduced in
Belgium.

In an initial phase, that will begin in the first half of 2007, about 5 500 large companies (with more than 100
employees each) will be obliged to file their VAT return electronically. In the first half of 2008, this rule would be
extended to about 20 000 middle-sized businesses. Finally, in the first half of 2009, it would become obligatory
for all companies, with a permanent exception for those that can demonstrate that they do not have the
necessary IT infrastructure to file their VAT returns electronically.

In the long term, these obligatory electronic VAT returns will lead to significant savings for companies. At
present, only 12% of taxable businesses file their returns electronically using Intervat or Edivat, with the result
that a large amount of paper bureaucracy continues to exist at companies. On average, an electronic VAT return
should save monthly filers 384 EUR per year. Quarterly filers would save 128 EUR per year. Multiplied by the
number of persons who file returns, this will lead in the long term to annual savings for the Belgian business
community of almost 100 million EUR.

As well as cost-cutting, the electronic return offers many other advantages:

- reduction in the paper workflow
- possibility of sending returns 24 hours a day, 7 days a week
- increased certainty of receipt and direct feedback on the processing of the return.

This makes it logical for the government to stimulate companies to use the new electronic technologies as much
as possible, and to phase in a system of obligatory electronic VAT returns.

In order for electronic returns to run even more smoothly, the Federal Government Department of Finance will be
introducing Intervat II in the near future, allowing multiple returns to be processed and information to be retrieved
directly from IT programs and sent through to the government.

2. Obligation to keep a paper journal of till receipts abolished

Obligatory paper bookkeeping was abolished in 2005. But the journal of till receipts that the VAT administration
requires of companies that are not obliged to provide invoices must still be kept on paper.

In practice, about 120 000 small businesses and self-employed people are still obliged to copy out their daily till
receipts or stick printouts into a bound book in an archaic fashion, on pain of VAT fines. In order to rectify this
absurd situation, they will be able to process their till receipts electronically from now on.

Of course the electronic processing will have to meet the same requirements as the paper version. The
electronic carriers will have to be stored and to be made available for inspection purposes, just like the paper
books.

This rule will come into force in a few months, once the necessary R.D.s have appeared in the Belgian Official
Gazette.

VAT treatment of performing artists

(2006/11/BE/VAT/__/artist/MGO) by marc.govers@vat-house.com

Following negotiations with the sector in December 2005, a decision has been made to postpone the scheme
included in the Decision of 30 September 2005, no. E.T. 108.828 until 1 July 2006 (Decision of 23 December
2005, no. E.T. 108.828/2). The transactions concerned can be exempted by the European Member States on the
basis of article 28(3)(b) of the Sixth VAT Directive. According to the directive, Member States that apply the
exemption may allow taxable persons to opt for VAT by way of a transitional scheme. This means that
performing artists, whether legal or natural persons, may be subject to ordinary VAT obligations and not to the
exemption scheme. The tax authority is currently looking into all the possibilities. The tax authority will be asked
to take into account the fact that new contracts are currently being signed for the next season. Contact is being
maintained with the sector, and it would be preferable not to reach a definitive standpoint too quickly. Negotiation
means finding out what problems there are in the sector and which categories of natural and legal persons are
involved (the latter are in the majority). It is necessary to find measures in the right direction (Verbal question,
Chamber, Committee for Finance and the Budget, 28 March 2006, Beknopt Verslag, COM 906, 1).

VAT rate for loft renovation

(2006/11/BE/VAT/__/renovation/loft/MGO) by marc.govers@vat-house.com

In accordance with Notice no. 6 of 22 August 1986, the five-year period must be calculated from the date of first
use, irrelevant of the original purpose of the building. Although demolition work is not theoretically eligible for the
reduced VAT rate, the reduced rate can be applied if such work is necessary for work to which a reduced VAT
rate does apply. For material purchased directly that is not installed by a supplier, the rate applicable to this
material applies. Processing of this material by a third party taxable person may be eligible for the reduced VAT
rate, however. The criterion of surface area primarily applies to conversion work with a view to extending the
building. The conversion of an industrial building to a loft is theoretically subject to the 6% reduced VAT rate, as
long as the conversion work is limited to the existing volume of the building. The reduced VAT rate does not
apply to the construction of one or more extra lofts on top of or adjacent to the existing building, if the new lofts
can come under the system of enforced co-propriety and be sold with VAT applied.
The tax authority has published all the information required to apply the VAT correctly on Fisconet. If necessary,
one can also consult the Prior Decisions department.

The tax authority is of the opinion that the standard VAT rate is the rule, in accordance with the Sixth VAT
Directive. Thus the burden of proof lies with the person who is requesting the reduced VAT rate. The tax
authority has presented the Minister of Finance with a draft to amend R.D. no. 20 in order to convert the directive
and anchor the priority of the standard VAT rate in Belgian law (Verbal question, Chamber, Committee for
Finance and the Budget, 28 March 2006, Beknopt Verslag, COM 906, 22).

Presentation of the books / payments by economic indicator

(2006/11/BE/VAT/__/Q.977/Pieters/inspection/MGO) by marc.govers@vat-house.com

Concerning the obligation to present excerpts from bank statements, it can be stated that in application of article
61, § 1 of the VAT Code, every VAT payer is obliged to present the books and documents stated in article 60 of
the VAT Code, at any request by the tax authority officials responsible for VAT. These documents are to be
presented for inspection where they are located, in order to be able to check the correct imposition of VAT on the
VAT payer or third parties. Excerpts from bank statements come under this obligation.

In theory, the books and documents described in article 61, § 1 of the VAT Code are not taken to the inspection
office by the officials or VAT payers. However, in order to limit the duration of the officials’ presence on company
premises, and with a view to dealing with the inspection quickly, these books and documents can be taken to the
inspection office at the request of either the official or the VAT payer. The VAT payer is free at any time to ask for
a proof of receipt. Of course the inspecting officials may not demand that the VAT payers apply this method.

On the other hand, this obligation to present the books must not be confused with the right to confiscate them
envisaged by article 61, § 2 of the VAT Code. In accordance with the latter article, the officials of the VAT
authority have the right to confiscate excerpts from bank statements in return for a proof of receipt whenever they
believe that these documents demonstrate or help to demonstrate that tax or a fine is owed by the party
concerned or a third party.

Excerpts from bank statements may then be taken by the inspecting officials or brought to the office by the VAT
payer, in return for a proof of receipt with an inventory of the documents received or taken. Moreover, these
officials must inform the VAT payer of the elements in these documents that lead them to conclude that a tax or
fine is owed. This right to confiscate documents is intended to ease the task of the tax authority and in particular
to prove in law that the demand for payment is justified. Consequently, the tax authority can keep these excerpts
from bank statements for quite a long time, even, if the case arises, until the end of the legal case.

On the basis of article 62, everyone is obliged at any request from the VAT officials, to provide all information
asked of them, verbally or in writing, in order to check the correct application of VAT to themselves or third
parties. The inspecting officials can therefore ask questions linked to the VAT payer’s assets, which usually
occurs in practice when the activity begins or ends, or when there are problems collecting the tax. They can also
make use of this to prepare a thorough inspection by an AOIF inspection centre.

The charge according to economic signs and indicators that is applied by the Direct Taxation Authority (art. 341
WIB/1992) is a specific form of proof for direct taxes. This charge, when applied to a VAT payer, may not in itself
be used as such to change the taxable turnover figure for VAT purposes. In such cases, the VAT authority, on
the basis of article 59 of the VAT Code, is however authorised to invoke the charge according to indicators as
evidence by reasonable suspicion to determine the taxable turnover for VAT purposes, if it can be suspected that
the supplementary income comes from a professional activity subject to VAT and that this income has not been
included in the turnover figure provided for VAT. This evidence according to economic signs and indicators does
after all correspond to evidence by reasonable suspicion if it allows the deduction of the fact to be demonstrated
(the extent of the income) by means of a known fact (the financial circumstances) (Q&A, Chamber, 2005-2006,
Q. no. 977 from Ms Pieters on 10 November 2006, no. 112, 21087).
Temco judgement – leasing of immovable property – domain concessions
(2006/11/BE/VAT/__/Temco/letting/property/Q.1008/Arens/MGO) by marc.govers@vat-house.com

An analysis of European jurisprudence has clearly shown that the tax authority has interpreted the exemption for
immovable leasing too narrowly, because its standpoint on the matter was only based on the concept of leasing
in the sense of the Belgian Civil Code. This means that domain concessions must be seen as immovable rentals
that are exempt from VAT on the basis of article 44, § 3, 2° of the VAT Code from the time that the conditions
stated by the European Court of Justice in various judgements are met. For the public bodies who grant such
concessions, the application of this exemption theoretically means that the deduction linked to the immovable
property given in concession must be revised for the years of the revision period that have not yet expired.
However, taking into account the fact that the system applied to domain concessions up to now was derived from
the tax authority’s own standpoint, in order not to damage the interests of public bodies against their reasonable
expectations by suddenly increasing the burden on their financial circumstances with the amount of revisions to
be made on deductions, the Minister of Finance has decided to relieve these bodies of the need to revise
deductions on investments prior to the date when the system took effect, namely 1 January 2006.

The VAT system that has been applied to domain concessions up to now led to a paradoxical situation because
the provision of goods that are immovable by nature by a person in private law, which is taxable with VAT on the
basis of article 4 of the VAT Code, was exempted from VAT with no right to deduct, whereas the same
transaction carried out in the public domain by a public authority, which is not taxable on the basis of article 6 of
the VAT Code, was sometimes subject to VAT and thus allowed the right to deduct input tax. Since the change
to the VAT system that applies to domain concessions has at last allowed a certain equality of treatment again
between public and private bodies, the Minister of Finance does not consider it appropriate to change the VAT
Code with a view to applying VAT to domain concessions alone (Q&A, Chamber, 2005-2006, Q. no. 1008 from
Mr Arens on 24 November 2006, no. 112, 21097).

Annual VAT listing: extension of filing deadline

(2006/11/BE/VAT/__/listing/period/submission/MGO) by marc.govers@vat-house.com

The Minister of Finance has decided that the final deadline for the annual VAT listing, relating to the transactions
carried out in 2005, will be exceptionally extended by one month. VAT payers therefore have until 30 April 2006
to file their VAT listing. With a view to equal treatment of all businesses, this decision applies to all VAT listings,
irrelevant of how they are filed (on paper, on an information carrier, or electronically).

Clarification of R.D. no. 20

(2006/13/BE/VAT/TabA RD20/amputation/blind/disability/MGO) by marc.govers@vat-house.com

A Royal Decree dated 8 February 2006 was published in the Belgian Official Gazette on 17 February 2006,
second edition, containing the conditions by way of which total blindness, total inability to use to upper limbs or
amputation of the upper limbs and permanent disability directly due to the lower limbs of at least 50% are
determined. The R.D. comes under the Federal Government Department of Social Security and refers to R.D.
no. 20, Annex, Table A, category XXII, section I, § 1, 2°.
Total blindness, total inability to use to upper limbs or amputation of the upper limbs and permanent disability
directly due to the lower limbs of at least 50% are defined as disabilities confirmed by the medical examination
service of the General Directorate of Disabled Persons at the Federal Government Department of Social
Security, in accordance with the annex to that R.D. This annex is extensive, containing all the relevant criteria.

Amendment to AWDA
(2006/13/BE/CUS/EXC/__/inward/processing/warehouse/MGO) by marc.govers@vat-house.com

The law of 16 March 2006 to amend article 22-4 of the General Customs and Excise Code of 18 July 1977, and
revoking certain legal conditions on the security to be provided for Customs warehouses, inward processing
(suspension scheme) and treatment under Customs supervision, was printed in the Belgian Official Gazette of 30
March 2006. This law amends the General Customs and Excise Code (AWDA) in terms of the security that has
to be provided to obtain approval of the premises used for temporary storage. It revokes the law on Customs
warehouses, which linked the granting of a permit to manage a Customs warehouse or to use the Customs
warehousing system to the condition of providing security. The R.D.s which prescribed the security to be
provided in the context of the economic Customs schemes of Customs warehouses, inward processing
(suspension scheme) and treatment under Customs supervision have also been revoked.

Exemption for education - extra-curricular activities

(2006/13/BE/VAT/44 WBTW/E.T. 110.675/education/exemption/MGO) by marc.govers@vat-house.com

Article 44, § 2, 4° of the VAT Code exempts the provision of school or university education, vocational training
and retraining, and the provision of closely linked services and supplies of goods, such as accommodation, food
and drink and the text books used for exempted education, by institutions that are recognised for this purpose by
the relevant government authority, or that are annexed to or dependent on such institutions. This exemption also
includes supplies of goods and services by institutions whose education services come under the exemptions,
to their pupils, when organising extra-curricular activities (sport, music lessons, pottery, drama, language and IT
courses, classes in the woods or in the snow, school trips for final year students etc.), irrelevant of whether these
activities take place in school hours or not. Moreover, if a non-profit organisation is specifically set up to carry out
some of the services closely connected to education, such as transportation of pupils, providing food and drink to
the pupils or organising the aforesaid extra-curricular activities, it is assumed that this organisation is dependent
on an educational institution in the sense of article 44, § 2, 4° of the VAT Code if the members of staff and/or
parents of the pupils at this institution take an active part in its management or direction. The supplies of goods
and services by such an institution, carried out in connection with activities (e.g. a school fete, dinner, evening
show etc.) to obtain financial support for all or part of its activities, can also benefit from the exemption in article
44, § 2, 12° of the VAT Code, like the educational institution itself. This exemption can also be applied to the
supplies of goods and services made by an organisation, managed or directed by staff or parents of pupils at an
educational institution, whose main aim is to obtain help and financial support for the educational activities,
upbringing and extra-curricular activities of this institution, in particular by organising the aforesaid
activities. However, it should not be forgotten that the exemption in article 44, § 2, 12° of the VAT Code is
exclusively restricted to supplies of goods and services carried out by the institutions in question on the occasion
of the activities it carries out. It cannot apply to transactions that are part of a continual or regularly repeated (e.g.
weekly) activity that would cause a distortion of competition with respect to traders in the sector concerned
(Decision of 10 March 2006, nr. E.T. 110.675, www.fisconet.fgov.be).

Right to deduct for a land parceller for infrastructure work

(2006/13/BE/VAT/44 WBTW/E.T. 109.060/land/infrastructure/MGO) by marc.govers@vat-house.com

The economic activity of a land parceller consists of dividing a plot of land into a number of individual parcels
intended for the construction of housing, business zones etc., or of preparing this land for sale. This activity can,
where appropriate, be combined with that of a building promoter, which consists of developing a real estate
project on land prepared for construction, with the intention of selling the built-upon parcels to one or more
buyers.
In order to exercise their activities, land parcellers must have a parcelling permit from the local authorities. In
order to exploit this permit, the authorities theoretically oblige the parceller to deal with urban construction. This
mainly means work on the infrastructure to integrate the land parcels into the community (e.g. laying access
routes and a network of roads, installing a sewer system, water, gas and electricity distribution networks,
providing lights in public places, creating green areas and playgrounds etc.). The cost of this infrastructure, that
must be transferred to the local authority for free, is usually charged through to the buyers of the land parcels.
Before the Programme Law of 2 August 2002 came into effect (see Notice no. 24/2002), this type of
infrastructure was not considered buildings for VAT purposes. Because of the transfer to the local authority, the
VAT imposed on this infrastructure could not theoretically be deducted. A land parceller who sold on the parcels
he obtained after preparing them for construction could not therefore deduct the VAT imposed on the
infrastructure work. However, a special rule was made for building promoters in Notice no. 17 of 29 July 1975.
This notice covered, among other things, the case where a building promoter sells land with a building he
constructed or had constructed and can deduct the VAT imposed on the infrastructure work imposed on him by
the local authority, notwithstanding the free transfer to the local authority, as long as the value of this work is
included in the taxable basis of the buildings sold to the various buyers (see nos. 20 to 28 of Notice no.
17/1975). However, the free transfer of a building – according to the definition of a building at the time of this
notice, i.e. in its usual sense – led to the removal described in article 12, § 2, second part, of the VAT Code (the
current article 12, § 1, first part, 2° of the VAT Code) on the part of the building promoter.
Since the new terms of the Programme Law of 2 August 2002 came into effect, the term ‘building,’ in accordance
with the Sixth VAT Directive, has been extended to include any construction work fixed to the ground. This new
definition of a building thus now includes infrastructure work (road network, public sewers etc.) that is imposed by
the local authority, and whose property rights must be transferred to this local authority. Strictly speaking,
therefore, there is no justification for any difference in treatment between the transfer of buildings in the old sense
(houses, immovable property intended for offices, warehouses etc.) and the transfer of road networks, sewers
etc., which are counted as buildings according to the new definition. Point 51 of Notice no. 24 of 6 December
2002 states in this respect that when the infrastructure work in question is the work done by the land parceller as
an obligation imposed by the building permit granted to him, whose property rights must be transferred to the
local authorities for free, then the VAT imposed on this work is not deductible.
However, it has turned out that the application of this rule by building promoters would lead to problems, since
there is a chance that this rule would lead to an increased cost for the buyers of built-up parcels of land. The
cause of this is the obligation for the building promoter to remove the infrastructure work or, if the transfer was
initially fixed, to refrain from deducting the VAT imposed on the creation of this infrastructure, although in
economic terms, just as before, the buyers are the ones who bear the costs of this infrastructure. Consequently,
and taking into account moreover the fact that the creation of the infrastructure is a prior and essential condition
of parcelling the land and selling the built-up parcels, and despite the free transfer of the property rights to this
infrastructure to the local authorities, who will incorporate them into their public property, the tax authority has
decided with the consent of the Minister of Finance to apply the rule in Notice no. 17 of 29 July 1975 to
infrastructure work, meaning that the VAT charged to the buyers of built-up parcels of land, for whom the
infrastructure is ultimately intended, will be calculated on a taxable basis including the costs of the infrastructure.
This tolerance therefore only applies to infrastructure work linked to built-up parcels of land, as long as the cost
of this infrastructure to be transferred to the local authorities are included by the seller in the taxable basis of the
built-up parcels of land supplied to the buyers. However, it does not apply to the free transfer of buildings in the
usual sense (e.g. warehouses, houses, all or part of a building intended for offices etc.) or to the free creation of
infrastructure work for the authorities, or other work that is not related to built-up parcels of land. Neither does
this tolerance apply to the laying of roads or sewers as part of a parcelling project that merely aims to sell land
without buildings on it. In this case, the value of such work can only be charged through in the price for the
supply of the land, which is exempted by article 44, § 3, 1°, a), of the VAT Code. Neither does it apply to the sale
by a land parceller of a parcel of land together with the sale of a building (in the usual sense) by a professional
founder or a building promoter. The costs of the infrastructure are met by the land parceller in that case, and so
they are charged through in the value of the land sold by the land parceller, which is exempt from VAT, rather
than in the price of the building, which is sold by the professional founder or building promoter with VAT applied
(Decision of 15 March 2006, no. E.T. 109.060, www.fisconet.fgov.be).

Non-profit organisation with trade union aims

(2006/13/BE/VAT/44 WBTW/500.135/non-profit/trade union/exemption/MGO) by marc.govers@vat-house.com

The question concerned the application of the exemption in art. 44, § 2, 11° of the VAT Code to the activities of
the social security of a non-profit organisation, X1 (with intervention from the recognised social security office X2)
provided to its member in sector Y. In the case concerned, social security work (calculation of the net wage,
retention of social security contributions, wage deductions, issue of individual pay slips etc. for the members’
employees) was considered to be done for the individual members and not in the collective interest of all the
members. The aforesaid services do not lead to any direct advantage that would normally be obtained for all the
members of the non-profit organisation, who are bound to each other to bear the total cost of it collectively.
Therefore the transactions cannot be exempted from VAT (Prior Decision of 16 March 2006, nr. 500.135,
www.fisconet.fgov.be).

Investigations and inventory checks by the tax officials carried out after working hours and during the weekend
(2006/14/BE/VAT/59 WBTW/investigation/inspector/timingQ1013/Pieters/MGO) by marc.govers@vat-house.com
On the basis of article 59 of the VAT Code, violations of the VAT Code or the rules that implement it, as well as
facts that demonstrate or help to demonstrate liability for VAT or fines are to be proved by the tax authority, for
example by means of reports by Federal Government Department of Finance officials. On the basis of article 176
of RD /WIB 1992, in implementation of article 300 of the WIB/1992, the direct taxation officials are authorised to
investigate violations and issue reports of violations of direct taxation, even on their own. Besides that, it is also
the specific task of control centre officials of the company and income tax authority to carry out directed
investigations in order to prepare for the thorough inspection of the files they are to deal with in the course of the
coming inspection period. The control centre verification teams can also call upon the local investigation officials
to carry out these directed investigations. Officials of the direct taxation authority and the VAT authority also have
the possibility of carrying out directed investigations in certain circumstances.

The officials’ investigation tasks relate to all elements that tax imposition requires, e.g. checking the accuracy
and regularity of the journals and logs of receipts, checking that bills and receipts (in the hotel and catering
industry) are provide, investigating supplies to taxable persons disguised as sales to private individuals, stock
checks and investigations of complaints. When making notes, it is neither obligatory nor forbidden for the officials
to make their capacity known in advance, unless they are asked to do so. For the report to be valid, it must
contain not only the findings but also the name, capacity and signature of the official, as well as the date when
the findings were made and the date when the report was drawn up.

The burden of proof falls in theory on the tax authority, which has all the means of common law at its disposal,
including witnesses and suspicions, but not the oath (art. 59 of the VAT Code and art. 340 WIB/1992). In terms
of VAT, findings noted in a report have evidential value until proved otherwise. In terms of direct taxation, the
findings noted in a report have the value of ordinary information.

In no sense whatsoever is an obligation put upon the officials to issue a report of the findings they have made in
their personal life. However, it is stated that a tax official may make a report of facts that contradict the objectives
of his professional activity if he can indicate them in a perfectly discreet and judicious manner. However, the
official is bound to honour the professional secrecy to which he is subject (art. 337 WIB/1992 and art. 93bis, first
part, of the VAT Code).

The main task of the investigation departments is the systematic tracing of facts useful to the tax departments, in
other words to collect data useful for taxation and/or tax collection, excluding taxation itself. The aim of the
investigations must be seen as a type of supply to the inspection and collection departments. These
investigations are not part of the exclusive authority of the investigation departments.

Article 63 of the VAT Code states that anyone who exercises an economic activity must grant free access to the
officials authorised to inspect the application of VAT who are in possession of their proof of appointment, at any
time and without prior notice, to the premises where the activity is carried out, in order to allow them among other
things to investigate the books and documents located there. It is expressly stated that the visit can occur at any
time and without prior notice, and that the officials have the authority to investigate the books and documents
they find. To the same ends, the officials may also enter all buildings, workplaces, institutions, premises or other
places where transactions covered by the VAT Code are carried out or seem to be carried out, at any time and
without prior notice. However, they only have access to personal dwellings or inhabited premises between five
o’clock in the morning and nine o’clock at night, and only with the authorisation of the police judge.

The direct taxation officials can confirm violations at any time. If the direct taxation officials make use of the right
of access to business premises granted to them by article 319, WIB/1992, the investigation activities described in
this article can take place at any time that any activity is carried out on the premises, even outside normal
working hours. Access by direct taxation officials to private dwellings is limited in the same way as for VAT
officials.

Confirming violations and carrying out investigations must of course be done with the utmost discretion and
loyalty, within the limits of professional secrecy (Q&A, Chamber, 2005-2006, Q. no. 1013 from Mrs Pieters on 25
November 2005, no. 112, 21103).
Proof of intra-Community supply of vehicles
(2006/14/BE/VAT/39bis WBTW/proof/supply/intra-community/vehicle/Q1039/Goyvaerts/MGO) by
marc.govers@vat-house.com

With particular reference to the intra-Community supply of vehicles, it is still specified that all documents with
evidential value are permitted to provide proof of transportation to another Member State, but that no one specific
document in itself is vital or sufficient. It has already been clarified, however, that if the vehicle is intended for use
by the acquirer in his member State, then a copy of the vehicle’s registration document with a normal number
plate in the name of this customer in the Member State of destination, and a temporary proof of registration
provided in Belgium (if the acquirer is driving the vehicle out of the country in person) are certainly important and
useful supplementary elements of proof.

It is not possible to draw up a limitative list of the necessary documents that provide sufficient and indisputable
proof of the right to the exemption described in article 39bis of the VAT Code, for the same reasons as given in
the answer to question no. 1450 from Mr Pieters on 22 July 1998 (see Q&A, Chamber, 1997-1998, no. 145,
19964) and the question from Mr Fournaux on 8 September 1998 (see Q&A, Chamber, 1997-1998, no. 149,
20403).

After all, accepting a document or a certain formality as absolute proof is a violation of the basic principle of the
Single Market, can only encourage tax fraud practices and make them easier (falsified documents, falsified
stamps etc.) and contravenes article 84 of the VAT Code and article 172 of the Constitution because in this case
the tax authority would not be able to dispute the exemption although, for example, they might have evidence
that the goods had not left Belgium.

When the transportation is done by the buyer or on his behalf, the Belgian supplier must be very careful in
granting the VAT exemption, given that he has few elements of evidence at that point. It has already been
indicated that the supplier could impose the payment of a guarantee on the buyer as a precautionary measure, in
order to encourage the latter to provide the required proof. The Minister of Finance has pointed out that a copy of
a registration document is only one piece of evidence among others and in itself is neither sufficient nor vital.

As a rule the registration document should be located in every registered vehicle, which implies that sending a
copy of it cannot reasonably be a practical problem for the buyer. However, if the seller has not taken any
precautionary measures for the supply, it will be more difficult for him to obtain this document from the buyer.

If the buyer does not register the vehicle in his name in his Member State, and immediately sells it on to a buyer
established in another Member State, two different situations may occur.

In the first situation the buyer transports the vehicle to his own Member State before selling it on. In this case
there are two separate supplies with transport. The Belgian supplier must provide proof of transportation of the
vehicle by his customer to the customer’s Member State, which is the Member State of destination. The fact that
the vehicle will then be the subject of another transportation to another Member State theoretically has nothing to
do with the initial supply, unless of course the final recipient (and consequently also the final destination) is
already known at the time when the vehicle leaves the Belgian supplier’s organisation.

In the second situation, the vehicle is immediately transported from the Belgian supplier’s organisation to the final
recipient, without going to the intermediary buyer’s organisation. In that case, only one of the two supplies is a
supply with transport that can be exempted from VAT. It is to be remembered that the exemption stated in article
39bis of the VAT Code assumes that the transportation of the goods to another Member State is carried out by
the seller, the buyer or on their behalf. But if the transportation is carried out by or on behalf of a subsequent
buyer (the final recipient), then the conditions of the exemption in article 39bis of the Belgian VAT Code are
theoretically not met with respect to the supply made by the Belgian supplier and VAT is payable in Belgium.

Consequently in cases of transportation directly to the final buyer in a Member State other than that of the initial
buyer, the supplier is obliged not only to provide proof of transportation to another Member State, but also to be
certain that the person who collects the vehicle from him is genuinely acting on behalf of his customer (Q&A,
Chamber, 2005-2006, Q. no. 1039 from Mr Goyvaerts on 15 December 2005, nr. 112, 21114).

VAT obligations of SMEs

(2006/14/BE/VAT/__/small/business/threshold/Q1047/Gerkens/MGO) by marc.govers@vat-house.com

The exemption threshold for small businesses, which is being negotiated in the European institutions, is part of a
much larger collection of measures to simplify the VAT obligations consisting among other things of the
introduction of a one-stop-shop, a new VAT refund procedure for operators not established in the Member State
where VAT is incurred, harmonisation of the limitations on the right to deduct etc. The way in which decisions are
made on these measures, with each part being investigated more or less in isolation, is not clearly defined: is
each aspect to be accepted separately or should a single agreement be reached on all the measures discussed?
It has turned out to be difficult to separate the investigation into exemption thresholds from the one-stop-shop
system. For the threshold issue, certain Member States believe that the 100 000 EUR maximum threshold is too
high, others want a distinction to be made between supplies of goods and services, and still others would like a
split between two maximum thresholds (50 000 and 100 000 EUR) depending on the exemptions currently
applicable in each Member State. The complexity of the issues, the connection between certain issues and even
the possibility of accepting the proposals as a whole, linked to the method of decision-making on financial issues
that requires unanimity, gives the Minister of Finance cause to believe that no consensus will be reached before
1 July 2006. Belgium is not opposed to granting the Member States a certain degree of flexibility, although its
final standpoint will of course depend on the overall compromise reached. Once the directive has actually been
converted into Belgian law, the changes to the exemptions within the agreed room for manoeuvre will need to be
investigated in terms of the structure of our national economy. (Q&A, Chamber, 2005-2006, Q. no. 1047 from Ms
Gerkens on 21 December 2005, no. 112, 21118).

Notice on company and service centres

(2006/14/BE/VAT/__/service/center/taxable/non-taxable/Q1053/Casaer/MGO) by marc.govers@vat-house.com

The new VAT treatment of company and service centres that has been in effect since 1 January 2006 is justified
by developments in national and European jurisprudence. Notice no. 39/2005, published in that context by the
tax authority, allows the distinction to be made in a uniform and transparent manner between, on the one hand,
the taxed transactions of company and service centres and, on the other hand, their exempted immovable
leasing activities (with ancillary services where applicable) that are VAT-exempt. Incidentally, the Notice was
issued after extensive consultation with representatives of the sector concerned. Given the fact that the activities
of company and service centres are considered to be ongoing services, which lead to successive settlements or
payments on which the VAT is incurred at the end of each payment or settlement period, the new system applies
to the relevant services on which VAT was incurred from 1 January 2006 onwards, irrelevant of the date when
the contract was signed. Neither capacity of the service recipient nor the time when the contract was signed or
renewed have any influence on this. The Notice also deals with any regularisations to be made on past
transactions. The fact that a current contract has already been subject to tax supervision in the past does not
prevent it from needing to be tested against the new criteria from the date when the aforesaid Notice came into
effect (Q&A, Chamber, 2005-2006, Q. no. 1053 from Mr Casaer on 9 January 2006, no. 112, 21119).

Civil and criminal Customs debts

(2006/14/BE/CUS/281 AWDA/criminal/civil/procedure/Q1107/Borginon/MGO) by marc.govers@vat-house.com

When an irregularity or infringement of national or Community Customs regulations is committed, these acts will
have two clearly distinct legal consequences, on the one hand liability for the taxes, in this case a Customs debt
(in civil law) and on the other hand possible punishment of the crime (in criminal law). These two procedures are
separate and can theoretically be initiated separately by the tax authority.

Criminal procedure
When a tax debt is confirmed as a result of incorrect declarations, non-clearance of declarations or confirmations
of fraud, the civil debt that arises will be paired with an infringement of Customs law. On the basis of article 281
of the General Customs and Excise Law (AWDA), all demands related to Customs and Excise violations will be
brought to the criminal courts by the Customs and Excise authority and prepared and judged according to the
Criminal Justice Code. In order to rule on two consequences, namely the tax debt on the one hand and the
penalty on the other, of a single fact, i.e. the violation of Customs law, the law allows that if a violation leads to
the payment of import or excise duties (the civil claim) then that civil claim will also be ruled upon by the criminal
court that deals with the criminal procedure. The civil and criminal claims proceed separately but can be ruled
upon together by the criminal judge in the case of violations.

Civil procedure
If no violation or irregularity has been committed (e.g. rejection of preferential origin if the declarer acted in good
faith) or if the tax authority drops the criminal case, the collection of the taxes owed will be done through civil law.
On the basis of article 280 of the AWDA, all purely civil cases that are not linked to a criminal penalty are judged
according to the Civil Code. Tax collection is initiated by means of an “invitation to payment,” and if payment
does not ensue, is followed with an enforcement order and/or further proceedings in the court of first instance
(Q&A, Chamber, 2005-2006, Q. no. 1107 from Mr Borginon on 25 January 2006, no. 112, 21130).

Container scanners
(2006/14/BE/CUS/__/container/scanner/Q1107/Borginon/MGO) by marc.govers@vat-house.com

The Customs and Excise Authority has already invested heavily in container scanners. At present it has one
mobile container scanner, 1 fixed container scanner in Antwerp, 2 scan vans at Zaventem airport, 1 scan van at
Bierset airport and 1 smaller fixed scanning device in the passenger area of Zaventem airport. All these devices
together cost about 10 million EUR. On 20 December 2005, an order was signed for the extra installation of fixed
container scanners at the port of Antwerp Waasland and at Zeebrugge, entailing an investment of 10.9 million
EUR. On the same day, another order was placed for a new mobile container scanner costing 1.3 million EUR.
Furthermore, the Federal Department of Finance’s budget for 2006 includes 11.3 million EUR for the purchase of
two scanners for containers loaded onto a train, both intended for the port of Antwerp. Under these
circumstances, the ports of Antwerp and Zeebrugge will be among the best-equipped ports in the world in terms
of scanning capacity. The purchase of scanning equipment for the Customs and Excise Authority is a sensible
and necessary investment that will allow Belgium to make efficient inspections without unnecessarily delaying
the flow of goods in the sea ports and airports, and to meet the requirements of its Community and bilateral
agreements (Q&A, Chamber, 2005-2006, Q. no. 1107 from Mr Borginon on 25 January 2006, no. 112, 21130).

Interpretation of the Papismedov judgement

(2006/14/BE/CUS/202 CCC/C-195/03/Papismedov/document/incorrectQ1108/Borginon/MGO) by
marc.govers@vat-house.com

In its judgement of the Papismedov case (ECJ, 3 March 2005, case C-195/03, M. Papismedov et al.), the
European Court of Justice ruled that goods brought to Customs with a summary declaration and validation of a
document for external Community Customs transport are not brought into the Customs territory of the European
Union in the appropriate manner if those goods receive an incorrect name in the documents handed over to the
Customs authorities (e.g. “cooking pans” instead of “cigarettes”). According to the European Court of Justice, the
Customs debt arises in that case on the basis of article 202 of the Community Customs Code (CCC), i.e.
because of “irregular importation” (illegal importation). In the case in question, the European Court of Justice
applied existing Community legislation to the concrete facts made available to it. The Community Customs Code
was introduced by means of a Regulation that is directly applicable in all Member States and prevails over
national legislation where the latter deviates from the former. The manner in which a Customs debt arises,
determination of the amount and cancellation of the debt are set by the Community Customs Code and not by
national laws. The Papismedov judgement was a matter of interpreting Community law, and does not therefore
require any changes to national law (Q&A, Chamber, 2005-2006, Q. no. 1108 from Mr Borginon on 25 January
2006, no. 112, 21133).

VAT rate on school diaries

(2006/14/BE/VAT/TabA RD20/rate/diary/Q1128/Viseur/MGO) by marc.govers@vat-house.com
In accordance with category XIX, item 1 of table A of the Annex to R.D. no. 20, the supply of books, leaflets and
similar printed matter, including atlases, is subject to the 6% reduced VAT rate. The goods included in this
category consist exclusively, or at least mainly, of texts and/or illustrations, and are intended to be read or looked
at. However, printed matter intended for filling in cannot benefit from the reduced VAT rate. This means that the
following are excluded from the application of that rate: logs and notebooks of all types, accounting books,
notepads and diaries, even if certain pages carry pre-printed information. Since school diaries clearly belong to
the latter category and are not included in any other category of tables A or B of the annex to R.D. no. 20, their
supply is subject to VAT at the standard rate, currently 21%. Even if they are aimed at a diverse public, school
diaries and diaries in general are characterised by the intention to be filled in by the owner, which is sufficient to
justify the application of the same VAT rate (Q&A, Chamber, 2005-2006, Q. no. 1128 from Mr Viseur on 2
February 2006, no. 112, 21158).

Exemption for doctors

(2006/14/BE/VAT/44 WBTW/E.T. 110.411/exemption/doctor/MGO) by marc.govers@vat-house.com

In the various judgements concerning the scope of the exemption described in article 13A (1)(c) of the Sixth VAT
Directive, converted into Belgian law by article 44, § 1, 2° of the VAT Code (including the judgements of 14
September 2000, case C-384/98, 10 September 2002, case C-141/00, and 20 November 2003, linked cases C-
212/01 and C-307/01) that were referred to the European Court of Justice, the Court ruled that this exemption
only applies to medical care with a therapeutic aim with a view to the diagnosis, treatment and, where possible,
the cure of diseases or health problems. However it has been found that the strict application of the rules set by
the Court may lead to various practical problems for both the tax authority and the medical and paramedical
professions concerned. For this reason, the tax authority will accept that the exemption in article 44, § 1, 2° of
the VAT Code may continue to be applied to all the transactions allowed by Belgian administrative practice in the
context of this application (see the VAT Manual, no. 315 and the Decision of 13 October, no. E.T. 96.270)
(Decision of 1 March 2006, no. E.T. 110.411, www.fisconet.fgov.be).

VAT rate on printed advertising material

(2006/14/BE/VAT/TabA RD20/E.T. 98.968/rate/printed/advertising/MGO) by marc.govers@vat-house.com

In accordance with category XIX of table A of the Annex to R.D. no. 20, printed newspapers, magazines and
books are theoretically subject to the 6% reduced VAT rate. Printed matter published for advertising purposes or
mainly dedicated to advertising, however, are excluded from this category and are thus subject to the 21%
standard VAT rate. This category is the subject of commentary in the Decision of 13 June 2002, no. E.T. 98.968.
Printed advertising material is defined as all printed matter that is used to promote the sale of goods or services,
including immovable property, rights and obligations in the exercise of a commercial, financial, industrial or craft
activity. Prospectuses and company brochures directed at customers or potential customers in connection with
available products or services or the activities of companies are without any doubt printed advertising material
(see point III, C, 1, fourth punt of the aforesaid Decision). This also applies to brochures with a commercial aim,
specifically intended for the sales personnel of a business (agents, delegated agents, representatives,
distributors etc.) or any person authorised to intervene in the sale or consumption of goods (e.g. doctors in the
context of prescribing medicines, teachers for the choice of school books). This decision supplements the
Decision of 13 June 2002, no. E.T. 98.968 (Decision of 24 March 2006, no. E.T. 107.492, www.fisconet.fgov.be).

Services of a photographer for school photos – right to exercise a professional activity

(2006/14/BE/VAT/18, 32, 44 WBTW/TabA RD20/rate/exemption/photo/school/activity/MGO) by
marc.govers@vat-house.com

Many educational establishments benefit once a year from the services of a photographer, who carries out
various activities (class photos, individual photos of pupils, group photos of the teachers, photos of the teachers’
children etc.). There are three parties involved: the photographer, the educational establishment and the pupils’
parents. The legal relationships between these three parties are usually as follows.
The educational establishment grants the photographer the right to carry out a professional activity in the school.
The photographer offers the photographs for sale to the parents of the pupils through the intervention of the
school, without the latter intervening in a purchaser-seller relationship, receiving a commission, or more generally
under the conditions of article 13 of the VAT Code. Various elements demonstrate this:
- the photographer sets the sale price to the parents
- even if the photographer’s name is note present on the packaging, the photographer is acting at his own risk
towards the parents because the school does not take any responsibility for the parents or itself
- the class teacher merely hands the photos out to the pupils, stating the prices and when the pupils are to pay
for the photos they buy or to return the ones they don’t want, and fills in the internal forms on the basis of which
the school can issue the total payment for the photographer
- the school never issues the parents who buy photos with an invoice, debit note or equivalent document in its
own name (art. 13, § 2 VAT Code).

It is also customary for the photographer to grant a certain benefit:

- to the school (apart from providing a copy of each class photo for the archives, the photographer gives the
school a percentage of the sale to the parents)
- and to the head teacher and staff (a free class photo for the teacher and free photos of the teachers’ children
and the teaching team, reductions for the head and the staff if they make purchases from the photographer
during the year etc.).

As for the VAT rate that applies to the school when granting the right to the photographer to exercise a
professional activity: this is a service covered by article 18, § 1, part 1 and part 2, 6° of the VAT Code. This
transaction, carried out for valuable consideration since it is paid for by the benefits granted by the photographer
to the school and/or the head teacher and staff, is theoretically subject to VAT at the 21% standard rate.
However, the tax authority will accept that no VAT is imposed by schools covered by articles 6 and 44, § 2, 4° of
the VAT Code, which do not have any other activity subject to VAT. On the other hand, the supply of photos to
the parents of the pupils is taxable at the standard VAT rate, on the entire price paid by the parents, i.e. without
deduction of the percentage that the photographer may give to the school or the value of the benefits granted by
the photographer. Handing over the photographs to the school, irrelevant if this is done for the school itself, the
head teacher or the staff, is not done for free. This transaction is after all a consequence of the right granted to
the photographer by the school to exercise a professional activity. Hence handing over the photos is a supply of
goods. In accordance with article 32 of the VAT Code, this supply is taxable at the 21% standard rate on the
normal value of the photos, i.e. it depends on the sale price to the consumer set by the photographer (Decision of
27 March 2003, no. E.T. 110.941, www.fisconet.fgov.be).

Provision of advertising space or hoardings by private individuals

(2006/14/BE/VAT/2, 4 WBTW/E.T. 104989/taxable/space/advertising/MGO) by marc.govers@vat-house.com

The provision of advertising space or hoardings is an advertising service, which means that it is theoretically
subject to VAT if it is carried out by a person acting under the conditions of articles 2 and 4 of the VAT Code
(Decision of 10 May 1999, no. E.T. 77.024). However, if this provision is made by private individuals (non-VAT
payers) for certain surfaces in their private dwelling that they do not normally actively use for such activities
(establishing or adapting this dwelling, seeking tenants by means of advertisements etc.), then VAT is not
incurred. Nonetheless, since this is a concession, the persons concerned are not bound by it and may demand
VAT identification. It goes without saying that in that case, only the VAT imposed on the costs incurred
specifically with a view to providing these facilities can be deducted. Finally, if these provisions are made by
persons who are already subject to VAT for other taxable activities, the normal rules apply. This treatment also
applies in comparable cases, in particular the case where private individuals attach stickers or other advertising
material to their cars in return for payment (Decision of 28 March 2006, no. E.T. 104.989, www.fisconet.fgov.be).

VAT rate on margarine

(2006/14/BE/VAT/TabA RD20/E.T. 110.936/rate/margarine/MGO) by marc.govers@vat-house.com

It is to be recalled that margarine is expressly excluded from the application of the 6% VAT rate for prepared
edible fats (category IX, 4, of table A of the annex to R.D. no. 20). Margarine is subject to the 12 % VAT rate
(category VI of table B of the annex to R.D. no. 20). Taking EC Regulation no. 2991/94 of 5 December 1994 into
account, which sets the norms for spreadable fat products, margarine must be understood to mean the following
for VAT purposes:
- products obtained from plant and/or animal fats with a fat content of at least 80 %, for which "margarine" is used
in the sale name
- products obtained from plant and/or animal fats with a fat content of at least 60% and no more than 62%, for
which "3/4 margarine" is generally used in the sale name
- products obtained from plant and/or animal fats with a fat content of at least 39 % and no more than 41%, for
which "half-fat margarine," “minarine” or “halvarine” is used in the sale name.

Given this Regulation, however, the following are not considered margarines for the purposes of category VI of
the aforesaid table B and are thus subject to the 6% VAT rate (R.D. no. 20, annex, table A, IX, 4): prepared
edible fats obtained from plant and/or animal fats with one of the following fat contents:
- less than 39 %
- more than 41 % and less than 60 %
- more than 62 % and less than 80 % (Decision of 5 April 2006, no. E.T. 110.936, www.fisconet.fgov.be).

Reason for extending the VAT listing deadline

(2006/15/BE/VAT/__/recapitulative/statement/MGO) by marc.govers@vat-house.com

The deadline for filing the VAT listing has been extended until 30 April 2006 because the French and German
language forms could not be sent out unitl 17 and 28 March because of technical problems with the printing
(Verbal question, Chamber, Committee for Finance and the Budget, 18 April 2006, Beknopt Verslag, COM 914,
5).

VAT deduction and football boxes

(2006/15/BE/VAT/45 WBTW/deduction/football/Q.1064/DevliesMGO) by marc.govers@vat-house.com

The standpoint of the Minister of Finance and the tax authority remains unchanged as regards VAT deduction
and football spectator boxes. For the provision of business seats and boxes to businesses by football clubs in
return for payment, where the persons invited by such businesses are also provided with food and drinks on the
occasion of a football match, and given the clear stipulation of article 45, § 3, 3° and 4° of the VAT Code, the
VAT imposed on the costs of food and drink provided under such circumstances and on reception costs incurred
by these businesses on the same occasion is completely excluded from the right to deduct.
However, the costs incurred by businesses with respect to the use of business seats and boxes are not
considered to be reception costs in the sense of article 45, § 3, 4° of the VAT Code if the businesses are using
the business seats and loges to carry out some form of advertising. In this case these costs are considered to be
advertising costs. The rules applicable in this case apply likewise to other sporting events (tennis, volleyball etc.)
and to cultural events (theatre, cinema, concerts etc.) if the organisation is subject to VAT.
Reception costs – which are excluded from the right to deduct on the basis of article 45, § 3, 4° of the VAT Code
– are the costs incurred by VAT payers in the context of public relations, reception and leisure for people foreign
to the company. The exclusion from this right to deduct meets the objectives of article 17(6), first part, second
sentence of the Sixth VAT Directive, namely the exclusion from the right to deduct of expenditure that is not of a
strictly professional nature, such as luxury items, leisure or representation costs. The difference between
reception costs and publicity costs, for VAT purposes, was the subject of a judgement by the Court of Cassation.
In its judgement dated 8 April 2005, the Court of Cassation ruled on the classification of relaxation and leisure
costs incurred as part of a party gathering mainly and directly intended to inform buyers of the existence and
attributes of a product or service with the intention of promoting its sales. The tax authority submitted to the Court
of Cassation’s decision not to consider such expenses, which are incurred with a view to publicising specified
products and so are publicity and expenditure of a strictly professional nature, as reception costs in the sense of
article 45, § 3, 4° of the VAT Code.
However, it should not be forgotten that article 45, § 3, 3° of the VAT Code, apart from the exceptions mentioned
in that article, excludes the VAT imposed on accommodation, food and drink costs in the sense of article 18, § 1,
second part, 10° and 11° of the VAT Code from the right to deduct. Given this explicit stipulation, it must not be
forgotten that if costs are incurred with a view to publicising specific products or services that cannot be
considered reception costs in the sense of article 45, § 3, 4° of the VAT Code, then the limitation to deduction
stated in article 45, § 3, 3° of the VAT Code nonetheless still applies.
This issue has already been the subject of various publications via the tax documentation database and internal
guidelines to tax authority officials. The officials are clearly obliged to apply and defend these guidelines. (Q&A,
Chamber, 2005-2006, Q. no. 1064 from Mr Devlies on 11 January 2006, no. 113, 21557).

Beneficial scheme for the disabled

(2006/15/BE/VAT/__/rate/reduced/disabled/Q.1152/Geerts/MGO) by marc.govers@vat-house.com

With reference to the beneficial scheme for the disabled (reduced VAT rate), Belgium has obtained permission
from the European Commission to keep the current tax benefits under the express condition that this scheme
must not be changed at all. Any more flexible application or extension of the beneficial VAT scheme therefore
needs to be approved by the European Commission (Q&A, Chamber, 2005-2006, Q. no. 1152 from Mr Geerts on
16 Febuary 2006, no. 113, 21575).

Exchange of information abroad

(2006/15/BE/VAT/__/exchange/information/Q.1164/van der Maelen/MGO) by marc.govers@vat-house.com

The following data can be provided in connection with requests for information abroad. The figures relate to the
year 2005 and are provisional, since not all the data is available for the time being.
- Administrative co-operation between the Member States (EC Regulation no. 1798/2003): 1 338
- International collection assistance: 130
- Requests to view data on intra-Community acquisitions: 2 892 805
- Requests to confirm VAT identification numbers: 676 505.
For earlier years, please refer to the annual reports of the general tax and levies authority, which can be found
on the Federal Government Department of Finance’s portal site (www.minfin.fgov.be) (Q&A, Chamber, 2005-
2006, Q. no. 1164 from Mr Van der Maelen on 20 February 2006, no. 113, 21578).

Validity checks on foreign VAT identification numbers

(2006/15/BE/VAT/22 WBTW/validity/number/VIES/Q.1170/Van den Eynde/MGO) by marc.govers@vat-
house.com

The following issue regularly occurs in practice: when the trading transaction takes place, the foreign VAT
number is confirmed, but when it is verified later, the same number turns out to be no longer valid.
The verification procedure for a VAT identification number is summarised in section V of EC Regulation no.
1798/2003 of 7 October 2003 on administrative support in the area of VAT, in particular articles 22 and 27. On
the basis of these articles, each Member State must maintain an electronic database of its VAT payers. The
appropriate authorities in the other Member States can consult this database electronically at any time.
moreover, on the basis of article 22 (2) of this regulation, the Member States must ensure that these databases
are kept up to date, complete and accurate. Therefore it is not impossible that changes to the validity of a foreign
buyer’s VAT number can occur between the time of requesting confirmation of this number and the time when
the quarterly intra-Community report is processed. In such a situation, it goes without saying that if the VAT
payer can provide a certificate issued by the Central Unit (CLO), then the inspection officer in question will not
ignore it. If contradictions occur, the Minister of Finance believes it is normal for the inspecting officer to contact
the Belgian Central Unit to find out the cause of this, possible in co-operation with the Central Unit in the other
Member State (Q&A, Chamber, 2005-2006, Q. no. 1170 from Mr Van den Eynde on 6 March 2006, no. 113,
21579).

Workplaces for learning on the job

(2006/15/BE/VAT/44 WBTW/E.T.109.771/exemption/job/learning/MGO) by marc.govers@vat-house.com

Companies for learning on the job (EFT) and workplaces for learning on the job (AFT) are institutions that are
recognised and subsidised by the government in order to provide training for young jobseekers who do not
generally have a lower-level secondary education diploma. As for the legal framework of these two types of
organisation, models are provided by the decision of the Walloon government on 6 April 1995 with respect to the
recognition of companies for learning on the job and the decree by the French Community Commission on 27
April 1995 for the recognition of organisations for socio-professional inclusion and the subsidising of their
vocational training activities for unemployed people and jobseekers with a low educational level aimed at
increasing their chance of finding work through co-ordinated provisions for socio-professional inclusion. As well
as a basic education adapted to individual needs (maths, a language etc.), these organisations put jobseekers in
a real employment situation through activities that they organise themselves leading to the production and/or
marketing of goods and services. Such training is mainly intended to re-integrate jobseekers with poor prospects
at a socio-professional level and to allow them to sign a job contract or to get access to suitable professional
training.
Given the above, it occurs in practice that EFTS and AFTS have the status of partially taxable persons for VAT,
because on the one hand they provide free training to jobseekers (activities outside the scope of VAT) and on the
other they make supplies of goods or services in return for payment from the customers (activities within the
scope of VAT). For the latter activities, it should be pointed out that certain activities can benefit from a VAT
exemption, in particular family help services as described in article 44, § 2, 2°, of the VAT Code.
As for the right to deduct, it has been decided that since the exempted vocational training to some extent results
in activities within the scope of the VAT Code, only the VAT imposed on the supplies of goods and provisions of
services that are directly and exclusively used by the training organisation are excluded from the right to deduct
on the basis of article 45, § 1 of the VAT Code. All other VAT, however, and specifically that incurred on the
costs linked to both production and training that is considered to be linked to the production, are connected to the
organisation’s production activity and are therefore theoretically deductible. It goes without saying that a proviso
must be made for the stipulations of article 46 of the VAT Code for mixed VAT payers (e.g. if an EFT or AFT
carries out activities exempted by article 44, § 2, 2° of the VAT Code as well as exempted activities) and the
limitations and exemptions to the right to deduct in article 45, §§2 and 3 of the VAT Code. Finally, it should be
pointed out that the subsidies received by these two types of organisation, intended to cover the cost of training
activities and staff, do not influence the right to deduct in any way (Decision of 10 April 2006, nr. E.T. 109.771,
www.fisconet.fgov.be).

Local sewers
(2006/15/BE/VAT/__ /E.T. 110.925/purification/water/local/authority/revision/MGO) by marc.govers@vat-
house.com

The purification obligations imposed on drinking water companies in implementation of European, federal and
regional regulations for waste water came into force on 1 January 2005. If local authorities, groups of local
authorities or companies in public law already had the status of VAT payers for the supply of drinking water, then
water purification will be a burden on their taxable activity from that time onwards. This means that the VAT on
the costs incurred in this context are deductible from that date onwards. If the local authorities or companies in
public law do not deal with supplying drinking water themselves, then they will become VAT payers for the
collection and disposal of waste water if these services can be considered transport services and are provided in
return for payment to a third party, e.g. a drinking water company. Because it is possible to classify this activity
as a waste water transportation service for the benefit of a third party, it is required that besides the provision and
maintenance of the sewer network, the staff of these local authorities or companies in public law, or possibly a
sub-contractor working under their supervision, actively intervenes in the collection and disposal of waste water.
This is the case when, besides operation maintenance of the infrastructure (maintenance and repairs to the
sewers) extra activities are carried out such as supervising and operating the pumps at pumping stations, high-
pressure tubing and overflows, as well as, for example, operating small-scale water purification installations. If it
is a waste waster transportation service, then the local authority or company in public law is also responsible for
the good condition and functioning of the infrastructure, which means that their job includes finding measures to
avoid overflows, activating reserve pumps if the main pumps break down or exceed their maximum capacity due
to heavy rain. These local authorities will have the capacity of VAT payers from the time when the contract with
the drinking water company for the transportation of waste water was effectively signed.
As for the revision to the local authorities’ advantage of the VAT deducted on the VAT imposed on company
assets, in this case the sewer network, the jurisprudence of the European Court of Justice in the Waterschap
Zeeuws Vlaanderen case (C- 378/02 of 2 June 2005) must be taken into account (please see decision no. E.T.
110.412 of 20 December 2005.
The Minister of Finance has therefore decided that local authorities which had the status of VAT payers before 1
July 2005 can still invoke the former administrative standpoint that allowed VAT payers to deduct part of the VAT
imposed on obtaining company assets that were bought or obtained before they became VAT payers (see the
parliamentary question dated 16 March 2006 from Mr Steverlynck, Senate, plenary sitting).
The local authorities that did not obtain the capacity of VAT payers until after 1 July 2005 cannot therefore make
a revision of the VAT imposed on the company assets they bought before they became VAT payers (Decision of
28 March 2006, no. E.T. 110.925, www.fisconet.fgov.be).

Speakers / sportspeople
(2006/15/BE/VAT/__ /E.T. 108.828/arftist/athlete/MGO) by marc.govers@vat-house.com

The Decision of 30 September 2005, no. E.T. 108.828, on the basis of which the exemption in article 44, § 2, 8°
of the VAT Code applies to performing artists irrelevant of the legal form in which they perform (natural or legal
persons) has been extended to include the services provided by speakers as envisaged by the first sentence of
this clause. The exemption for speakers who are legal persons also applies from 1 July 2006 onwards (see the
Decision of 23 December 2005, no. E.T. 108.828/2 on performing artists). The above also applies to
sportspeople (Informaties en Mededelingen, AOIF-BTW, 13 April 2006, www.fisconet.fgov.be).

VAT compensations
(2006/16/BE/VAT/__/compensation/Q.845/Pieters/MGO) by marc.govers@vat-house.com

It is not possible for VAT to make a list of all the possible corrections that can be made or compensated during a
running investigation, since these corrections and compensations may have extremely diverse causes. However,
it must indeed be stated that a compensation or regularisation to the VAT payer’s advantage is only possible if all
the legal conditions for exercising this right are met. The period in which the permitted corrections can be directly
regularised and/or compensated depends on the regularisation method. Regularisation either takes place directly
in the regularisation return, or in the next periodic VAT return to be filed. Statistic channels for data collection do
generally include a box for an “amount to be compensated.” Consequently, VAT compensations are always
taken into account separately. The normal complaint procedures apply to disputes surrounding possible
compensation: a complaint can be made at any stage of the administrative dispute and at any level of the tax
authority (the head of the department that imposed the tax, the regional director, the Central Tax Authority or the
Minister’s advisory cabinet) (Q&A, Chamber, 2005-2006, Q. no. 845 from Ms Pieters on 16 June 2005, no. 114,
21896).

Charging labour and service activities through to related or unrelated companies

(2006/16/BE/VAT/__/labour/service/staff/Q.866/Pieters/MGO) by marc.govers@vat-house.com

Charging services to businesses and companies which may or may not be related to the service provider is
theoretically subject to VAT if these services take place in Belgium, irrelevant of whether the parties consider
these services as a provision of staff in the sense of article 18, § 1, second part, 2° of the VAT Code or classify
them as service contracts in the sense of article 18, § 1, second part, 1° of the VAT Code. In accordance with
article 26 of the VAT Code, the VAT must be calculated on the price of the service as agreed between the two
parties. The applicable VAT rate will depend on the nature of the transaction. The provision of staff is subject to
the 21% standard VAT rate. However, a service contract is taxed at the VAT rate applicable to the nature of the
work done. (Q&A, Chamber, 2005-2006, Q. no. 866 from Ms Pieters on 29 June 2005, no. 114, 21901).

VAT rate for psychologists

(2006/16/BE/VAT/13A 6DIR/rate/psychologist/Q.1048/Gerkens/MGO) by marc.govers@vat-house.com

The clear wording of article 13 A (1) (c) of the Sixth VAT Directive states that the Member States are to define
the medical and paramedical professions to which the exemption applies. The conditions of the exemption must
be interpreted strictly, and the conditions must be objective and simple to apply. Article 44, § 1, 2° of the VAT
Code, which deals with this exemption, aims to prevent the provision of personal care services that are not
officially recognised, or that these services are carried out by unqualified persons, and therefore only exempts
the services that are included in the nomenclature of medical provisions for obligatory sickness and disability
insurance. This affects psychotherapists as well as psychologists. After all, the principle of tax neutrality for
identical transactions must not be violated. The issue also affects the activities of osteopaths, homeopaths,
chiropractors and acupuncturists, or more generally the practitioners of non-conventional treatments in medicine,
pharmaceuticals, physiotherapy, nursing and the paramedical professions. Although there is no question of
extending the circle of paramedical professions to which a preferential tax scheme applies to any great extent,
including professions whose practitioners are not qualified to carry out medical or paramedical services, the
Minister of Finance has no objection to extending the exemption in the VAT Code to include the services of
psychologists and psychotherapists, as well as to the services carried out by certain practitioners of non-
conventional practices in the area of health care. Nonetheless, it is recommended that all the conditions for
exercising these practices, and particularly those relating to the registration of authorised practitioners, be set
down in law, as well as a list of all the permitted and forbidden activities and the training required. This is not part
of the tax domain but it must be the starting point for a tax application (Q&A, Chamber, 2005-2006, Q. no. 1048
from Ms Gerkens on 22 December 2005, no. 114, 21925).

State of affairs of the “BTW-revue”

(2006/16/BE/VAT/__/rate/psychologist/Q.1147/Van der Maelen/MGO) by marc.govers@vat-house.com

With reference to the “BTW-Revue” (VAT review), the last two issues of 2002 are still in the printing phase.
Delays in the publication of the VAT review are due to the permanent shortage of staff in the various
departments who deal with this material. The tax authority is considering discontinuing the publication of the
BTW-Revue. Despite this recognised situation of increasing difficulties in ensuring the regular publication on
paper of fiscal documentation, it must be emphasised that all the texts included in the aforesaid publications can
be found on the Fisconet website, and that they appear far more rapidly than would be the case with a paper
publication. This site allows both internal and external clients to consult, download or print out all the available
fiscal documentation for free, with search options that can only be offered by an electronic version (Q&A,
Chamber, 2005-2006, Q. no. 1147 from Mr Van der Maelen on 16 February 2006, no. 114, 21947).

Trade in heat energy certificates

(2006/16/BE/VAT/44 WBTW/E.T.110.775/heat/energy/certificate/MGO) by marc.govers@vat-house.com

A heat energy certificate is an item of transferable immaterial goods that shows that a heat energy installation
named on the certificate made a heat energy saving of 1000 kWh in a year that is also stated on the certificate.
Heat energy certificates are granted to the owner of heat energy installations. These certificates can be freely
traded. For VAT purposes, heat energy certificates are to be treated in the same way as green energy
certificates, i.e. tradable securities covered by the exemption in article 44, § 3, 10° of the VAT Code (see the
Decision of 28 February 2006, no. E.T. 110.775, www.fisconet.fgov) (Decision of 24 April 2006, no. E.T.
110.775/2, www.fisconet.fgov.be).

Global Refund Cheque

(2006/16/BE/VAT/8 RD18/39 WBTW/refund/cheque/MGO) by marc.govers@vat-house.com

In a Decision dated 3 August 1999, no. E.T. 62.087 (www.fisconet.fgov.be), the tax authority recognised on the
basis of article 8, 4° of R.D. no. 18 the model for the “global refund cheque” (GRF cheque), which was appended
to the decision, as a document valid as an invoice for the purposes of the VAT exemption described in article 39,
§1, 4° of the VAT Code. This decision states among other things that, in implementation of article 5, § 1, 6° of
R.D. no. 1, the nature, quantity and description of the goods supplied must be stated on the GRF cheque in the
box provided. Either for practical reasons (lack of space on the cheque in the case of large purchases) or
economic reasons (lack of time to fill it in manually) and in analogy to the conditions of no. 31 of Notice no.
5/1976 of 10 March 1976, the tax authority will accept that the above data relating to the goods supplied can be
replaced by a till receipt attached to the cheque for the purposes of the refund procedure.

This procedure can only be applied under the following circumstances:

a) conditions pertaining to the till receipt. The till receipt must state at least the following data:
- sequential number allocated to the transaction by the cash register, taken from an uninterrupted series
- the date of supply
- the usual description of the goods supplied, their quantity and price. The inspecting Customs officer will use this
description to ensure that the goods submitted correspond to those on the till receipt. Thus a code developed by
the seller alone, stated on the till receipt, cannot be accepted
- the total price including VAT
b) conditions pertaining to the GRF cheque:
- there must be a reference to the sequential number allocated to the transaction by the cash register in the box
intended for the description of the goods
- the other boxes on the GRF cheque must all be filled in as described in the aforementioned decision
c) the total amount of the purchases stated on the GRF cheque, including VAT, must correspond to the total
amount of purchases, including VAT, which is stated on the attached till receipt. The tax authority will accept here
that a VAT-paying seller draws up a single GRF cheque for supplies of goods to a single recipient during one
calendar month. This implies that several till receipts, each confirming a different purchase by the same
purchaser, can be attached to that GRF cheque as long as the condition for stating the purchase amounts is met.
In this case the GRF cheque must bear the date of the last till receipt to be issued for which the exemption is
requested. For the purposes of the minimum value stated in article 8, 2° of R.D. no. 18, the values of all the till
receipts attached to the GRF cheque must be added together.
d) the GRF cheque and the till receipt(s) form a single unit for the duration of the refund procedure. For this
reason, they must remain attached to each other when presented to Customs, when exercising the right to a VAT
refund, and during the legal storage period for VAT.

It goes without saying that the other conditions for applying the exemption, which are included in articles 8 and 9
of R.D. no. 18, remain unchanged. It should be noted here that all the goods stated on the till receipt must be
exported, and none of them may remain in Belgium. The failure to meet one of these conditions will theoretically
lead to the right to the VAT exemption being removed (Decision of 11 April 2006, no. E.T. 62.087,
www.fisconet.fgov.be).

Serviceflats – extension work – difference between “conversions” and “new buildings”

(2006/16/BE/VAT/RD20/service/flat/conversion/new/rate/reduced/MGO) by marc.govers@vat-house.com

The 12 % and 6 % reduced VAT rates, provided for in categories X of Table B and XXXI of Table A of the Annex
to R.D. no. 20, apply to the transactions described in these categories, particularly homes for the elderly in the
context of the legislation on care of the elderly recognised by the appropriate authority. This means the
institutions which, under the name of “rest home,” “rest place” or “home for the elderly” provide both
accommodation and household or family care, fully or partly, to senior citizens aged at least 60 who stay there
regularly. These regulatory conditions also cover “service flats” and “living complexes with services” intended for
senior citizens, if these flats and complexes are recognised by the appropriate authority as coming under the
legislation on care of the elderly. More specifically, these institutions are intended for elderly people whose health
allows them to (and who wish to) live in a more independent manner, with the opportunity where necessary to
benefit from the same services (e.g. cleaning, meal deliveries, medical supervision) as those offered in rest
homes. The regulations for care of the elderly belong to the powers of local councils and the Regions, who set
the conditions under which these institutions are to work.

It has been noted in this respect that the Walloon Region and German Linguistic Community currently impose a
double condition on service flats:
- firstly, they must maintain a functional link with a recognised rest home (that obliges the rest home at least to
prioritise people who live in the service flats and wish to participate, for accommodation and communal activities)
- secondly, the service flats must be physically separate from the rest home with which they have a functional
link: the two entities may be located on the same site but not in the same building.

The question was asked as to the applicable VAT rate for construction work on a service flat building. If the
building intended for use as a service flat building is located on a different site than the one where the rest home
with which it has a functional link is situated, construction work on that building is subject to the 12% reduced
VAT rate in accordance with category X of table B of the Annex to R.D. no. 20. The 12 % VAT also applies in
theory to construction work on a service flat building located on the same site as the rest home with which it has
a functional link. Such work can, however, be considered extension work on the existing rest home, and thus as
conversion work on that rest home in accordance with category XXXI of Table A of the Annex to R.D. no. 20,
subject to the 6% VAT rate, taking into account the conditions set by the Decision of 1 september 1994, no. E.T.
106.933 (www.fisconet.fgov.be).

In this context, it is to be recalled that the application of the 6% VAT rate to extension work on a living complex
does not require the newly built part to be located under the same roof as the old part. The construction of a
separate new wing can be considered a conversion in the sense of item XXXI of Table A of the Annex to R.D. no.
20. The application of the 6% reduced rate does require the following, however, on the assumption that all the
other conditions are met:
- that the surface area of the old part remains meaningful in comparison to the new part, which means that the
surface area of the old part is more than half the total surface area of the living complex after work has been
done
- that the new part (new building) cannot function independently of the old part, but forms a single coherent and
complementary whole with it as far as the use of the building is concerned (e.g.: shared heating for the rest home
and the service flats, shared water and electricity meters, a shared telephone exchange) and concerning the
services provided to the inhabitants of the two parts. Besides the regional and community conditions, this
ultimately comes down to a question of facts, which besides the criterion that the service flats and rest home are
to be located on the same site, a totality of elements must be taken into account such as the existence of a
common owner of the service flats and rest home, the possibility for residents of the two entities to make use of
the same premises (e.g. a kitchen, dining room in the rest home, leisure areas) and to benefit from common
services (e.g. security staff whom the residents of the services flats can call on, maintenance staff).

Finally, it goes with out saying that respecting these rules automatically allows application of the 6% VAT rate –
as long as all the other conditions are fulfilled – if the service flats are built in the parts of Belgium where the rules
allow it by means of vertical or horizontal additions to the premises, under the same roof as that of the rest home
itself (Decision of 29 March 2006, no. E.T. 106.933/2, www.fisconet.fgov.be).

VAT rate for recycling centres

(2006/16/BE/VAT/Tab 20 RD20/recycling/rate/MGO) by marc.govers@vat-house.com

If a recycling centre carries out work on immovable property, it loses the benefit of the reduced VAT rate for the
services described in category XXXV of table A to R.D. no. 20. It is still possible to invoke category XXIIIbis of
the same table for the supply of goods if all the conditions are met. Passing on general costs subject to the
standard VAT rate is not the reason for the loss of the benefit gained by applying the aforementioned categories.
The same applies to the sale of goods used as company assets. The tax authority has drawn up a circular to
clarify the special scheme contained in the aforesaid categories. The circular is currently being studied by the
Minister of Finance’s advisory cabinet. (Verbal question, Chamber, Committee for Finance and the Budget, 25
April 2006, COM 931, 7).

Stating intrastat codes on the invoice

(2006/16/BE/VAT/__/invoice/intrrastat/code/MGO) by marc.govers@vat-house.com

The obligatory statements on the invoice are set by the VAT regulations in each individual Member State. It is not
obligatory in Belgium to state the goods code on outgoing invoices. According to the intrastat regulations, it is
only necessary to state this on the intrastat return itself. The Institute of National Accounts (INR) does advise
stating the code on outgoing invoices, however, because exporters know the codes of their products better than
importers. Making it compulsory to state to code would mean an administrative simplification for importers and
the INR. The Minister of the Economy thinks that a European initiative would be a good idea and will indicate the
issue to the Minister of Finance. The latter will then have to decide whether to broach the issue at European level
(Verbal question, Chamber, Committee for the business community, scientific policy, education, the national
scientific and cultural institutions, trade and agriculture, 26 April 2006, COM 934, 7).

Reduced VAT rate for fitted cupboards

(2006/16/BE/VAT/Tab 20 RD20/E.T.110.383/cupboard/rate/MGO) by marc.govers@vat-house.com
With the exception of the specific case described in category XXXI, §3, 3°, e) of table A of the annex to R.D. no.
20, including the supply of storage cupboards for a kitchen or bathroom and fixing them to a building, the
transaction consisting of the supply and fixing of storage cupboards in a building, in accordance with the
conditions of §3, 2°, of the aforesaid category XXXI, can only benefit from the reduced VAT rate for work on
immovable property if the cupboards become immovable by nature in the sense of article 518 of the Civil Code,
due to being fixed to the building. In general furniture does not become immovable by nature because it is fixed
to a building. This is why the transaction consisting of supplying storage cupboards and fixing them to a building
is normally subject to the 21% standard VAT rate.

If cupboards are supplied and fixed to a building at the same time in the two specific situations below, they
become immovable by nature by being incorporated into the building, and therefore the reduced VAT rates for
immovable transactions can be applied if all the conditions are met. It goes without saying that in that case, the
interior fittings of the cupboards (coatings, partitions, shelves etc.) also become immovable by nature. The cases
in question are:
1) if a dividing wall is formed between two rooms by using walls and planks specifically designed and constructed
for storage purposes and to be permanently fixed to a building (it is to be noted that the concept of a “dividing
wall” itself means that the construction in question must be closed off on at least one side, by a fixed wall or
using doors)
2) if a storage cupboard is permanently incorporated into the building. Two conditions are essential for this and
must be met simultaneously:
a) the cupboard must be designed specifically to take up the whole space in which it is fitted. This
means that it must be made exactly to measure for this space, so that it is fixed to the building and
closed in on the top, bottom, sides and back, “shut in” to the construction volume it is supposed to fill
and which is demarcated by a wall, a sloping roof or the underside of a staircase. However, the
cupboard may not have sides, a top, bottom or back in the sense that the masonry of the construction
volume it occupies fulfil these functions. It is not required for the front of the cupboard to be closed with
doors. If the cupboard fills the space beneath a staircase, it can even be accepted as immovable by
nature if the cupboard has a side that is not fixed to the building, on the condition that the cupboard
cannot be separated from the staircase. However, a cupboard, whether or not it has standard
measurements, to which skirting boards, decorative frames or similar finishes are attached in order to fill
up or hide the space between the cupboard and the building cannot be considered immovable by
nature.
b) the cupboard is a permanent part of the interior, which means:
- that it is not intended to be removed from the building into which it is incorporated and to which it is
fixed, if the building were sold or rented out
- that, in any case, it cannot be removed without damaging it
- that it cannot be used again after being removed (for example because of its particular features and
the unfinished nature of its built-in parts, it could not be used again as a normal storage cupboard)
(Decision of 27 March 2006, nr. E.T. 110.383, www.fisconet.fgov.be).

Prior decisions department

(2006/16/BE/VAT/__/ruling/MGO) by marc.govers@vat-house.com

From now on, the prior decisions department can be contacted at:
Tel.: 02.579.38.00
Fax: 02.579.51.01
E-mail: reception.dvbsda@minfin.fed.be

VAT circuits and good faith

(2006/17/BE/VAT/__/faud/good/faith/MGO) by marc.govers@vat-house.com

It is correct that the Court of Cassation has asked the European Court of Justice a number of pre-judicial
questions concerning VAT circuit fraud, more specifically in the Kittel and Recolta Recycling cases, to find out
whether the Belgian laws stating that a contract with an unlawful basis is fully null and void form an impediment
to the deduction of the VAT paid, which means a distinction is made between a VAT payer who signed the
agreement in good faith and one who was committing fraud. The European Court of Justice still has to make its
judgement on these two cases, which were linked in a dispensation dated 28 January 2005. Two other
comparable cases were also brought before the European Court by the Court of Cassation. However the
European Court suspended proceedings in anticipation of the judgement on the two linked cases. This means it
is too soon to take an official and definitive standpoint on the basis of the decision of the Advocate General,
before the European Court of Justice has reached a decision on the aforementioned cases. Neither is it possible
to make statements on the basis of the Optigen judgement of 12 January 2006 alone, with respect to the
consequences in Belgian law for persons who have already been found guilty of witting or unwitting participation
in circuit fraud. After all, two recent judgements by the European Court of Justice have stated that VAT payers
cannot deduct VAT they have paid if the operation that led to the right to deduct is a criminal practice. In that
case, VAT deduction can be rejected. Finally, in a judgement of 17 March 2006 (case C-234/04, Rosmarie
Kapferer, on space for freedom, safety and justice), the European Court of Justice stated that a national court
cannot in principle reinvestigate or overturn a judgement made in the last instance, even if it turns out to be in
contravention of Community law. Once the judgements have been made, the necessary decisions will be taken
on the basis of them. The next Programme Law will contain a number of conditions linked to VAT, including
some on the abuse of rights and the payment of VAT (verbal question, Chamber, Committee for Finance and the
Budget, 9 May 2006, COM 952, 5).

Local councils and sewers

(2006/17/BE/VAT/__/local/council/sewer/MGO) by marc.govers@vat-house.com

One only becomes a taxable person if one carries out transactions that are unequivocally intended to be
transactions in the sense of the VAT Code. A local council that constructs sewers long before the law obliges
them to do so is not carrying out a taxable transaction. Local councils are not under any obligation to sign a
contract with a drinking water company. It is up to the company to choose whether it wants to work with another
entity for the transportation of waste water. In the cases that the tax authority is investigating, it appears that the
way in which local councils apply the regulations does not necessarily make them taxable persons with the right
to deduct. For example, they can decide only to grant rights in rem or usufructary rights to the use of the sewer
system.
Thus the local authority only becomes taxable for VAT purposes from the point when a contract for service
provisions is signed. This is in accordance with the perspective of the European Court of Justice. Moreover, the
tax authority is investigating each case separately (Verbal question, Chamber, Committee for Finance and the
Budget, 9 May 2006, COM 952, 8).

Services of an interior designer

(2006/17/BE/VAT/18, 21 WBTW/E.T.110.100/interior/architect/immovable/property/MGO) by marc.govers@vat-
house.com

The services described in article 18, § 1, second part, 1° of the VAT Code, which are carried out by an interior
designer or similar service provider, usually consist of carrying out a study or examination to co-ordinate or
prepare for the decorating of a building. However, decorating a building can lead to both services considered
work on immovable property and other services such as the giving of advice on the purchase, positioning and
installing of interior elements (e.g furniture, lighting etc.) that will not become immovable by nature. In order to
avoid difficulties with VAT imposition where an interior designer provides both preparation or co-ordination
services for work on immovable property and other services, it has been decided that the place of such a service
must always be determined by applying article 21, § 3, 1° of the VAT Code (Decision of 28 April 2006, no. E.T.
110.100, www.fisconet.fgov.be).

Supply with installation of heaters, radiators or individual convectors running on wood, coal, oil, gas or electricity
(2006/17/BE/VAT/11bis RD 20/rate/reduced/installation/heater/radiator/MGO) by marc.govers@vat-house.com

The Minister of Finance has decided to extend the application of the 6% reduced VAT rate on the supply with
installation of heaters, radiators or individual convectors running on wood, coal, oil, gas or electricity from 1
January 2006 until 31 December 2010, as long as the same conditions are met as before, namely:
- that the equipment is connected to the chimney pipe with a fixed connecting piece (where appropriate, with a
separate outlet for gases or smoke to the outside) and/or connected to mains supplies through which fuel is
provided
- that the conditions of article 1bis of R.D. no. 20 are also fulfilled.
Moreover, it is to be noted that it is not sufficient for electric convectors merely to be plugged into an electric
socket. In order for the 6% reduced VAT rate to apply, they must be directly and permanently wired into the
building’s mains electricity. The mere supply of such heaters, boilers or individual convectors is of course subject
to the 21% standard VAT rate. The final consumers who can benefit from this measure, but who would have paid
VAT at the 21% standard rate since 1 January 2006, can request a refund of the overpaid VAT from their
supplier, who in turn will be refunded by the Treasury, taking into account however that the VAT refund period
expires at the end of the third calendar year following the one in which the cause of the refund arose (art. 82bis
WBTW) (Information and Communications, 3 May 2006, www.fisconet.fgov.be).

Direct sales
(2006/17/BE/VAT/E.T.102.595/direct/sale/MGO) by marc.govers@vat-house.com

The tax authority has published the list of those who hold a permit to apply the direct sales scheme described in
the Decision of 19 June 2002, no. E.T. 102.595, (state of affairs on 10 May 2006) (Information and
Communications, 10 May 2006, www.fisconet.fgov.be).

Filing VAT returns electronically

(2006/18&19/BE/VAT/__/electronic/return/MGO) by marc.govers@vat-house.com

On 19 May 2006 the Cabinet approved a bill of law to amend the VAT Code. In order to conform to article 22 of
the Sixth VAT Directive, the amendment to article 53octies, §2 of the VAT Code would give the Crown the power
to allow, or even require, certain returns and information to be sent electronically, under conditions to be set by
the Crown. The amendment is part of the administrative simplification programme for taxable persons and tax
authorities.

The new text obliges taxable persons who file periodic VAT returns to do so electronically. Taxable persons who
do not have the necessary technological means are exempt from this obligation. The obligation will be introduced
gradually. The amount of turnover realised in 2005 will be taken into account, as well as the matter of whether
the taxable persons in question file monthly or quarterly returns. The electronic identity card will be used when
filing electronic VAT returns.

The obligation will apply:

- from January 2007 for taxable persons whose annual turnover for 2005, for their entire economic activity,
amounts to more than 50 000 000 EUR (excl. VAT)
- eighteen months later for the other taxable persons who file monthly returns, including those whose annual
turnover is more than 200 000 EUR (excl. VAT) for all supplies of the following goods (risk sectors): mineral oils,
mobile telephone and computer equipment and their peripherals, accessories and components, and land
vehicles equipped with a motor that is subject to the registration regulations
- thirty months later for taxable persons who file their VAT return every quarter.

VAT rate on medical materials

(2006/18&19/BE/VAT/__/rate/medical/material/MGO) by marc.govers@vat-house.com

A general VAT reduction for medical materials is a budgetary measure. No agreement has been reached at
European level to include the renting out of such goods in category 4 of Annex H to the Sixth VAT Directive. After
consultation with the sector, the Federal Government Department of Finance has made a limited list of goods
that are eligible for a VAT reduction. At present the list is being investigated by the Federal Government
Department of Public Health (Verbal question; Chamber, Commission for Finance and the Budget, 18&19 May
2006, Beknopt Verslag, COM 968, 4).

Determination of benefits in kind

(2006/18&19/BE/VAT/__/benefit/kind/Q.816/Pieters/MGO) by marc.govers@vat-house.com

The different treatment of certain benefits in kind for income tax as opposed to VAT is due to the fact that the tax
systems in question are completely independent of each other in terms of material law. The Belgian VAT
regulations are of course based on the conditions of the Sixth VAT Directive and must consequently be kept in
accordance with these conditions. What applies to one tax does not necessarily apply to the other. This is the
case, for example, for the use of cars to which a specific scheme applies. For determining benefits in kind, the
direct taxation officials must consistently observe the relevant conditions stated in the Income Tax Code (Q&A,
Chamber, Q no. 816 from Mrs Pieters on 3 June 2005, no. 118, 22903).

Invoice statements
(2006/18&19/BE/VAT/__/invoice/statement/Q.1167/Van der Maelen/MGO) by marc.govers@vat-house.com

In order for an invoice to be considered correct, all the data required by article 5, §1, 6° of Royal Decree no. 1
must be stated, in order to identify the transaction and determine the VAT rate of the VAT incurred, including
particularly the usual name of the goods supplied and services provided, their quantities and the object of the
services. This data may be replaced by codes, as long as both parties have a list with a full description of the
codes used and can present them to the inspecting official to see on demand. The fine in article 70, §2 of the
VAT Code and Table C, Category II of R.D. no. 41 can be imposed if the statements are inaccurate and if these
violations cannot be merely coincidental, in particular with reference to the quantity and extent of the transactions
for which a document that conforms to the regulations is issued. If the incorrect invoice statements must be
considered coincidental, however, a fixed fine of 50 EUR per document issued applies, in accordance with the
scale described in the annex to R.D. no. 44, first section, category II. The tax authority will try to verify this issue
as far as possible and depending on the time given to officials to supervise the correct application of the VAT
regulations. No separate statistics are available for penalties imposed for these violations. The issue described
here will receive particular attention in the Notices intended to clarify Belgian invoicing regulations that are to be
published in the near future. (Q&A, Chamber, Q no. 1167 from Mr Van der Maelen on 22 February 2006, no.
118, 22921).

Building declaration
(2006/18&19/BE/VAT/__/building/declaration/Q.118/Q.198/Pieters/MGO) by marc.govers@vat-house.com

For work on immovable property supplied by a taxable person that refers to the construction of a building, article
36, §1, b) of the VAT Code states that the taxable basis may be no lower than the normal value of the service.
Unpaid help by family and friends is not subject to VAT, unless the person who provides unpaid help is a taxable
person who carries out work on immovable property and the work belongs to the activity for which this person is
liable for VAT (art. 2, first part, and art. 19, §2, 2° VAT Code). However, article 64, § 4 of the VAT Code contains
an assumption that, without proof to the contrary, any newly-constructed building is considered to have been
supplied by a taxable person in execution of one or more service provisions related to work on immovable
property. This is a juris tantum assumption, meaning that the owner of the building can use all the methods of
common law, except the oath, to prove that he personally constructed the building, fully or in part, or did so with
the unpaid help of third parties, this work is not taken into account when calculating the taxable basis. Thus the
tax will be limited to any VAT imposed on the building materials supplied. Written declarations by persons who
know about the work done because they were eye witnesses can be considered evidence in common law (Q&A,
Chamber, Q no. 118&194 from Mrs Pieters on 9 March 2006, no. 118, 22923).

Checking foreign VAT numbers

(2006/18&19/BE/VAT/__/VIES/Q.1180/Nollet/MGO) by marc.govers@vat-house.com

When verifying a foreign VAT identification number on the European Union’s ‘VIES’ site
(http://ec.europa.eu/taxation_customs/vies/en/vieshome.htm), this site also provides the name and address of
the taxable person concerned in certain Member States including Belgium. In Belgium’s case, article 4 of R.D.
no. 23 states: “The Minister of Finance may publish a list of taxable persons or allow one to be published. The list
shall state, among other things, the identification number allocated to them for VAT purposes.” This list contains
the names and addresses of the taxable persons. Since they can be published, they can also be made known on
the aforementioned website. Some other Member States also allow the names and addresses of taxable persons
to be made public: the Czech Republic (name only), Estonia, Finland, Lithuania, Latvia, Sweden and Slovenia.
The other Member States have decided not to make this information public for the time being, in accordance with
their national privacy laws. The argument in favour of making these names and addresses public is clear: taxable
persons who make intra-Community supplies of goods and services can use the database to check that the
name of a potential customer corresponds to the name of the taxable person to whom the VAT identification
number was allocated. The name or address of the taxable person can also be checked, however, by contacting
the national central connections bureau in their Member State (for Belgium, tel. 02 552 58 95 (French) and 02
552 58 91 (Dutch)). A certificate confirming that the number is valid can also be provided (Q&A, Chamber, Q. no.
1180 from Mr Nollet, 13 March 2006, no. 118, 22927).

Use of vehicles by the constructors of and traders in these vehicles

(2006/18&19/BE/VAT/58 WBTW/E.T. 107.150/vehicle/use/MGO) by marc.govers@vat-house.com

If new or second-hand vehicles (as long as they were not purchased under the margin scheme in article 58, § 4
of the VAT Code) are used by a constructor of or a trader in these vehicles, as a business asset in the sense of
article 6, § 1 of R.D. no. 3, the question as to whether a withdrawal must occur in the sense of article 12, § 1, first
part, 3° of the VAT Code will depend on the facts.

The following distinction must be made:

a) The exceptional use for a short time of a vehicle intended for sale by the constructor of or a trader in this
vehicle, for test drives with a view to sale, is not considered a transaction covered by article 12, § 1, first part, 3°,
of the VAT Code, because in this case there is no long-term use of the vehicle as a working tool or means of
operating the business (the vehicle is still exclusively intended for sale).
b) If a vehicle is used by a constructor of or a trader in vehicles in circumstances other than those described
above, in particularly if it is used with a view to the sale of other vehicles (this means demonstration or director’s
cars) or as a courtesy car, however, the vehicle will be considered to be used in the sense of 12, § 1, first part,
3°, of the VAT Code. The taxable person must draw up a document confirming this transaction (art. 3, K.B. nr. 1).
Under certain circumstances, the special scheme in Notice no. 9 of 30 July 1985 can apply to the use of
passenger vehicles and double-use vehicles by constructors of or traders in vehicles.

It should be noted that the number plates with which the vehicle is used (test drive plates “ZZ”, traders plates “Z”
or normal number plates) do not influence the need to make a withdrawal, where appropriate, in the sense of
article 12, § 1, first part, 3°, of the VAT Code. Nonetheless, the registration of a vehicle in the director’s log of
vehicle registration (D.I.V.) results in an effective assumption of taxable use, until the taxable person proves
otherwise (e.g. if DIV registration was requested for statistical reasons but the vehicle is not actually used). It is
also emphasised that the fact of whether a vehicle is included in the books as investment goods or fixed assets is
not a deciding factor.

In connection with the above, it is to be noted that the Decision of 26 January 1973, no. E.T. 8.434 has been
revoked. Point 14, a), of Notice no. 9 of 30 July 1985 has also been revoked, which means that from now on a
vehicle covered by test drive plates, depending on the circumstances of its use, can be the subject of a
withdrawal described in article 12, § 1, first part, 3°, of the VAT Code and, where appropriate, benefit from the
special scheme in the aforesaid Notice (see point b above) (Decision of 15 May 2006, no. E.T. 107.150,
www.fisconet.fgov.be).

Bill for the Programme Law

(2006/20/BE/VAT/51bis, 58, 59, 62bis, 70, 79 90, 93quaterdecies
WBTW/storage/inspection/authorisation/representation/Court/several/responsibility/MGO) by marc.govers@vat-
house.com

The bill put forward by the government on 31 May 2006 for the Programme Law contains a number of conditions
linked to VAT, more specifically:
1) a change to article 58, § 4, 7°, fourth part, of the VAT Code, concerning the seven-year storage period (art.
60, § 1 WBTW)

2) a change to article 62bis of the VAT Code concerning the officials authorised to inspect banks

There is no longer any reference to particular ranks of official. From now on, the Minister of Finance will have to
indicate the authorised official.

3) representation of the State before the courts

To these ends, the following will be included in article 90 of the VAT Code: “with reference to disputes over the
application of a tax law, the State can be represented in person by any official of a tax authority.”
This clause is taken from article 379 of the WIB/1992. It can be deduced from this general wording that it also
applied to VAT, but the fact that it was included in the WIB/1992 did not make this entirely clear.
Since the law of 15 March 1999 on the resolution of tax disputes, it was the lawmakers’ intention to give tax
officials the task of defending their case before the judge in order to make tax officials take responsibility for such
cases.
According to the Clarification Memorandum, experience with direct taxation in general has led to the greatest
satisfaction of the various players in legal disputes concerning fiscal material (officials, magistrates and lawyers),
meaning that there is nothing to oppose formalising the extension of this rule to VAT.

4) Right of officials to inspect documents

Article 93quaterdecies, § 1, third part, of the VAT Code is currently undergoing a technical amendment so that
the officials described in article 93quaterdecies of the VAT Code can gain access to the acts, documents,
registers and papers or information linked to legal proceedings that come under the authority of the federal
prosecutor.

5) measures to prevent abuse and introduction of several responsibility for the non-payment of VAT

The following changes to the VAT Code are planned in this respect:

- the following will be added to article1 of the VAT Code: Ҥ 10. For the purposes of this Code, abuse occurs
when the transactions carried out result in a tax advantage whose allocation violates the aim intended by this
Code and the decrees that implement it, and these transactions intrinsically aim to obtain this advantage.”

The following example is given in the Clarification Memorandum:

(1) the situation where a company requests its suppliers to address invoices to a permanent establishment
outside Belgium, although the goods and services stated on the invoice were in fact intended for the company
itself, in order to avoid paying an amount of VAT that could not be deducted or only in part (improper use of the
rules to determine place)
(2) the situation where a company that carries out the transactions described in article 44, § 3, 4° to 10° of the
VAT Code (exempted transactions with a negative impact on the amount of VAT that can be deducted) issues
invoices to a person established outside the European Union in order to benefit from a greater right to deduct,
although the genuine recipient of the supply is established within the European Union (improper use of article 45,
§ 1, 4° of the VAT Code).
(3) the situation where, when constructing buildings intended for transactions that do not result in the right to
deduct VAT on this transaction (e.g. a town hall, town square etc.), a public body (such as a local council) signs
an agreement for financing rental in the sense of article 44, § 3, 2°, b of the VAT Code and R.D. no. 30 to the
advantage of a third party (e.g. an autonomous local authority company), whereby the latter will rent the building
back to the public body. In this way the entire input VAT can be deducted, although on the other hand only a very
limited amount of VAT will be imposed, spread over about fifteen years.
Abuses that nonetheless formally meet the legal requirements are in no sense fraudulent behaviour, which
means a violation with the intention to evade tax or to allow tax evasion.
Companies should respect the intention of the law, which is not the case if they appear to apply the legal norms
but with the intention to obtain results that contradict the aims of those norms.
Abuse occurs when the aim of the transaction can in reality only be explained as bringing about the right to
obtaining an irregular advantage.
Again according to the Clarification Memorandum, the principle of choosing the least taxed option is not being
violated here, but limits are being put on it.

- in article 51bis, § 2 of the VAT Code, the words “is however relieved of several responsibility to that extent” will
be replaced by the words “is however relieved of several responsibility to that extent in the situations described
in § 1”.

- the following will be added to article 51bis of the VAT Code: Ҥ 4. All taxable persons are severally liable for
payment of the tax, together with the person who owes it by virtue of article 51, §§ 1 and 2, if they knew or
should have known at the time of making a transaction that the payment of the tax was not being made in the
chain of transactions or would be made with the intention of evading tax.”

According to the Clarification Memorandum, the proof to be provided by the tax authority can result from
circumstances that may indicate that VAT fraud was committed and the businesses were definitely aware of this
fact. For example, confirming that goods were offered at a price that is abnormally different from the market value
would surely lead to a need for vigilance and questions as to the origin of the goods in which the company is
trading. Other elements may lead or contribute to demonstrating that the taxable person knew or should have
known that the VAT was not paid or would not be paid in the chain of transactions. A reference may be made to
close family, economic or legal links between the contracting parties, abnormal quantities of goods traded in
comparison to the company’s assets, the involvement of a company in transactions links to goods it does not
normally trade in etc. Again according to the Clarification Memorandum, this reasonable obligation to be vigilant
is not too much of a burden on companies that already naturally take the necessary measures to believe in the
legitimacy of their transactions in good faith. The suspicions on which the tax authority bases its case can of
course be refuted and it is finally up to the courts to judge whether the tax authority’s suspicions are grounded.

- article 59, § 1, first part of the VAT Code will be replaced by: “Every violation or abuse of the conditions of this
Code or the rules that implement it, as well as facts that demonstrate or help to demonstrate that tax or a fine
has been incurred, can be proven by the tax authority according to the rules and by all methods of common law,
including witnesses and suspicions, but excluding the oath, and also by the reports of the officials of the Ministry
of Finance.”

- article 59, § 3 of the VAT Code will be revoked

- In article 70, § 1bis of the VAT Code, the words “Anyone who has benefited from an unlawful tax deduction” will
be replaced by the words “Anyone who has deducted the tax in an unlawful or unjustified manner”.

A certain jurisprudence assumed that a taxable person who included their deductible VAT in the VAT return did
not obtain it if no refund or allocation had occurred at the time of an inspection. This would mean that trying to
obtain an irregular deduction could not be punished, since the taxable person had not actually obtained the
benefit of the deduction because the tax authority had intervened too quickly. Although this standpoint is open to
considerable criticism, it is recommended for clarification that the unlawful obtaining of a deduction be replaced
by the unlawful exercise of the right to deduct.

- the existing text of article 79 of the VAT Code will become § 1 and the following will be added: “§ 2. In cases of
abuse, the party who deducted the tax on the transactions concerned will pay the thus deducted VAT amounts
back to the State.”

The Clarification Memorandum states that this new condition applies to VAT circuit fraud. If a taxable person
knowingly intervenes in such a transaction, set up with the exclusive aim of reducing a tax debt, abuse has
indeed occurred and the Community VAT system requires the taxable person’s right to deduct to be removed.
Removing a taxable person’s right to deduct when they take part, without their knowledge and without
collaboration, in a chain where a third interested party does not pay to the State a VAT amount he has charged,
would however detract from the objective nature of the VAT system. Therefore if the taxable person does not
know that he is part of a wider transaction set up to evade a tax obligation, or if he is indeed aware of this but
does not carry out his part in the unlawful arrangements made, then his right to deduct will not be affected.

6) effecting some of the outstanding tax debt claims for VAT.

VAT balances after bankruptcy dealings

(2006/20/BE/VAT/__/balance/bankruptcy/MGO) by marc.govers@vat-house.com

The conditions of article 334, first part, of the Programme Law of 27 December 2004 created a legal body sui
generis with respect to sums that are to be repaid or paid to a tax debtor in application of the legal conditions for
income taxes and the equivalent, for VAT or by virtue of the conditions of civil law for non-required payments.
Article 334, second part, moreover states that the first part continues to apply in cases of confiscation, transfer,
merger or insolvability proceedings. The lawmaker thus clearly intends this legal body to apply to all sums to be
paid or paid back to a tax debtor that meet the conditions of the first part of article 334, irrelevant of the stage of
the bankruptcy procedure where the sum is to be paid or paid back. The lawmaker is making it expressly clear
here that no distinction van be made between the period before bankruptcy was declared, the period between
the bankruptcy verdict and the closure of bankruptcy dealings, and the period after closing the bankruptcy
dealings. In response to two pre-judicial questions, the Court of Arbitration has given a positive reaction to the
linking of article 334, second part, of the Programme Law of 27 December 2004 and articles 10 and 11 of the
Constitution, because thanks to the application of the aforesaid article 334 tax demands can also be
compensated in cases of confiscation, transfer, merger or insolvability proceedings. (Verbal question,
Committee for Finance and the Budget, Beknopt Verslag, 30 May 2006, COM 978, 4).

VAT refund for tobacco products

(2006/20/BE/VAT/58, 77 WBTW/Q.1218/Van Biesen/refund/tobacco/MGO) by marc.govers@vat-house.com

In accordance with article 58, § 1 of the VAT Code, with respect to tobacco products brought into Belgium by
importation or intra-Community acquisition or produced in Belgium, VAT is imposed whenever Belgian excise
duties are due on these products in accordance with the relevant laws or regulations. The VAT is calculated on
the price stated on the tax strip, or if no price is stated, on the taxable basis for excise duties. The VAT imposed
is VAT incurred on the importation, intra-Community acquisition and supply of tobacco products, up to the stage
of final consumption. The amount of VAT thus calculated is paid by the person liable for excise duties to the
receiver authorised to impose excise duties. This unique method of imposing VAT, at the source and in theory
definitively, differs from imposition by fractionated VAT payments along the economic chain, at the end of which
the goods reach the consumption phase. However it does respect the essence of VAT that must be definitively
paid to the Treasury on the price applicable at the end consumption stage. In the situation where a customer of a
tobacco product producer is declared bankrupt and the invoices for the supply of tobacco products are not paid
to the producer, the whole or partial loss of the debt claim on the producer’s price does not prevent the goods
ending up in the final consumption stage as a result of subsequent undisputed supplies. In such circumstances,
the refund described in article 77, § 1, 7° of the VAT Code, that is normally only intended to correct a problem
that occurs in one of the stages of the normal chain of fractionated VAT payments, cannot be granted to the
supplier (Q&A, Chamber, 2005-2006, Q. no. 1218 from Mr Van Biesen on 6 April 2006, no. 121, 23479).

Accuracy of the VAT identification number to be stated by the recipient of intra-Community supplies
(2006/20/BE/VAT/39bis WBTW/Q.1271/Wathelet/number/intra-community/supply/MGO) by marc.govers@vat-
house.com

According to article 39bis, first part, 1° of the VAT Code, supplies of goods are exempted when transported or
dispatched by the seller or recipient or on their behalf out of Belgium but within the European Union, when
carried out for another taxable person or for a non-taxable legal entity acting as such in another Member State
and obliged to subject intra-Community acquisitions to VAT in that country. Consequently the VAT exemption is
bound to two essential conditions:
- transportation outside Belgium but within the European Union by the seller or recipient or on their behalf
- the supply to a buyer who is obliged to subject all his intra-Community acquisitions to VAT in another Member
State.
The Belgian supplier can only check whether the second condition has been met if the recipient provides him
with a valid VAT identification number issued in another Member State. This obligation is derived from article 2 of
R.D. no. 52, taken in implementation of articles 39bis and 40, § 1, 1°, b) of the VAT Code. On the other hand,
there is no legal condition to stipulate the way in which the Belgian supplier has to provide proof of his
customer’s VAT identification. The Minister of Finance refers to the answer to question no. 1180 from Mr Nollet
on 13 March 2006 (Q&A, Chamber, 2005-2006, no. 1180, 22927) concerning the various possibilities available to
the active parties in this situation (Q&A, Chamber, 2005-2006, Q. no. 1271 from Mr Wathelet on 3 May 2006, no.
121, 23488).

Flat-rate scheme
(2006/25/BE/VAT/6 KB2/flat-rate/scheme/normal/date/MGO) by marc.govers@vat-house.com

Article 6 of K.B. no. 2 with respect to the flat-rate scheme has been amended. With effect from 23 June 2006, a
taxable person who no longer meets the conditions for taxation according to the flat-rate scheme will be
subjected to normal VAT treatment as of the first day of the calendar quarter following the one in which his
circumstances changed (instead of 1 January of the year following the one in which his circumstances changed)
(R.D. of 10 June 2006, Belgian Official Gazette, 23 June 2006).

Transfer of sportspeople
(2006/25/BE/VAT/21 WBTW/transfer/sports/MGO) by marc.govers@vat-house.com

Article 4 of the law of 24 February 1978, concerning the employment contract for paid sportspeople, describes a
payment to which a disadvantaged party is entitled if the contract is broken. This payment is not subject to VAT.
The free, definitive or temporary transfer of footballers more than 16 years old is a service in the sense of article
18, § 1, second part, 7° of the VAT Code, irrelevant of whether they are professional sportspeople or not. This
means there is no difference between the two. The place of this transaction is determined on the basis of article
21, § 2 and § 3, 7°, a, of the VAT Code. Please also refer to the Decision of 6 April 1993, no. E.T. 10612. In
accordance with the normal rules that apply to VAT, the extra transfer fee (e.g. when a sportsperson is
transferred by the new club for an even higher sum, the old club can receive an extra transfer fee) is also subject
to VAT (Verbal question, Chamber, Committee for Finance and the Budget, Beknopt Verslag, 21 June 2006,
COM 1013, 9).

Performing artists
(2006/25/BE/VAT/__/performing/artist/date/implementation/MGO) by marc.govers@vat-house.com

In a consultation between the Minister of Finance and the tax authority on the one hand, and representatives of
the professional sector on the other, it appeared that a significant number of contracts for the current season
concerning the services of performing artists had already been signed before the publication of the answer to
parliamentary question no. 865 of 29 June 2005, from Ms Trees Pieters MP (Q&A, Chamber, 2004-2005, no. 51-
94, 16773) with effect after that date, meaning that the prices set in these contracts could not take the changed
standpoint into account. For this reason, it has been decided not to insist on the application of decision E.T.
108 828 of 30 September 2005 before 1 July 2006. However, it should be noted that the revision of the VAT
imposed on company assets is expressly covered by articles 48 and 49 of the VAT Code and articles 9 and 10,
first part, 1º, of R.D. no. 3, which correspond to article 20 of the Sixth VAT Directive (Q&A, Senate, 2005-2006,
Q. no. 3-4452 from Ms Hermans on 16 January 2006, no. 3-60, 5460).

Purchase of antique office furniture

(2006/25/BE/VAT/__/Q3-4164/ De Schamphelaere/antique/deduction/MGO) by marc.govers@vat-house.com

The VAT imposed on the purchase of antique office furniture that is effectively used as such by a taxable person
in the context of the economic activity for which the capacity of taxable person with the right to deduct was
obtained, is deductible according to the normal rules (Q&A, Senate, 2005-2006, Q. no. 3-4164 from Ms De
Schamphelaere on 18 January 2006, no. 3-60, 5463).
VAT rate on internet connection
(2006/25/BE/VAT/__/Q3-4284/De Schamphelaere/internet/connection/rate/MGO) by marc.govers@vat-
house.com

The supply of services via a broadband connection, including access to the internet and the World Wide Web, is
considered to be a supply of telecommunication services as described in article 18, § 1, second part, 14º, of the
VAT Code. Since 1 January 1993, as a result of the harmonisation of VAT rates, the Member States of the
European Union have only been able to apply a reduced VAT rate to supplies of goods and services listed in
annex H to the Sixth VAT Directive. Given that annex H does not include telecommunication services, a
reduction of the applicable VAT rate cannot be considered. More specifically, the European Union has published
a proposal to amend the Sixth VAT Directive in terms of the reduced VAT rates (COM(2003) 397, definitive, of
16 July 2003), and the intention is for the Member States to reach an agreement on this at European level. This
proposal states explicitly that such services should continue to be subjected to the standard VAT rate in the
future as well (Q&A, Senate, 2005-2006, Q. no. 3-4284 from Ms De Schamphelaere on 7 February 2006, no. 3-
60, 5468).

VAT rate for child car seats

(2006/25/BE/VAT/__/Q3-4237/Noreilde/child/car/rate/MGO) by marc.govers@vat-house.com

Annex H, category 4 of the Sixth VAT Directive allows Member States the possibility of applying a reduced VAT
rate to child seats in motor vehicles. Child seats in motor vehicles are currently subject to the 21% standard VAT
rate in Belgium. A reduction of the VAT rate for child seats was not included as such in the federal government
agreement. When the 2006 budget was drawn up, no provisions were made to finance such a measure. Before
making a decision on a possible reduction on the VAT rate for child car seats, the necessary clarity about the
cost price must be gained. The Minister of Finance has charged the tax authority with collecting accurate
information on this matter (Q&A, Senate, 2005-2006, Q. no. 3-4237 from Mr Noreilde on 2 February 2006, no. 3-
61, 5630).

VAT disputes between suppliers and customers

(2006/25/BE/VAT/__/Q1150/Pieters/dispute/supplier/customer/MGO) by marc.govers@vat-house.com

According to the general principles of good management and the justifiable expectations of taxable persons, and
with a view to legal certainty and the optimal functioning of the economic chain, it is indeed desirable for citizens
to have access to information on the tax treatment of given activities or transactions, whether or not in the
context of a dispute. This may be a purely technical matter or a complex fiscal mechanism. If a dispute arises
between parties concerning the application of the VAT rules, the tax authority should always be considered a
third party. Thus a genuine intervention as a party in the dispute is ruled out. In this case however, nothing is to
prevent the parties from turning to the tax authority in order to ask for clarification of the application of a legal
rule, which in a certain sense is the subject of the dispute that has arisen between them, and from solving the
dispute on this basis. More generally, there are various possibilities for obtaining individualised information from
the tax authority concerning particular situations, to do with the application or interpretation of a given legal rule.

The application of the law of 24 December 2002 concerning prior decisions on fiscal matters is as follows: this
law grants all taxable persons who submit a question on any concrete (future) activity or situation the right to
obtain a decision on the tax implications of that activity or situation before it takes place. This whether they are
natural or artificial persons, whether or not they are established in Belgium, in a professional or private context.
Naturally it only applies as long as the contracts and applicable legal conditions are observed. Only in cases
where a query is unacceptable for legally defined reasons will a prior decision not be made. The prior decision
made legally binds the tax authority with respect to the applicant for the prior decision. The law states an
indicative period of three months for the applicant to receive an answer to the question. This period can be
extended or reduced in consultation with the applicant. By applying this law, the tax authority is increasing legal
certainty for citizens. Moreover, it is a way of considerably reducing the number of complaints on tax matters.
With a view to obtaining information concerning tax authority standpoints, citizens can also use all recognised
and usual methods of communication to approach any authority responsible for VAT. Without exception, citizens
can therefore approach either the local VAT inspection office, the VAT directorate, the central tax authority or
even the advisors to the Minister of Finance for problems related to applying the VAT law. However it should be
emphasised that in theory, if citizens approach a local VAT inspection office or directorate, they should respect
the territorial authority of these departments and so approach the correct office or department for their area.
Given that citizens can theoretically approach any of these services with their questions immediately and without
needing to go through any preliminary procedures, irrelevant of their place in the administrative hierarchy, this
practice is not necessarily subject to administrative supervision. Moreover, there is no legal deadline by which
the tax authority has to provide an answer. Nonetheless, efforts are always made, wholly in accordance with the
principles of proper management, to provide citizens with answers to their questions within a reasonable period.
The period within which this is possible will of course depend on the nature of the question. Some questions can
be answered more or less immediately, whereas others require more detailed study (Q&A, Chamber, 2005-2006,
Q. no. 1150 from Ms Pieters on 15 February 2006, no. 115, 22241).

Animal burials [administrative decision]

(2006/25/BE/VAT/21 WBTW/E.T.111.433/animal/burial/MGO) by marc.govers@vat-house.com

It occurs that the operator of an animal graveyard does not only commit himself to providing and maintaining a
burial place, but also provides extra services according to the individual wishes of the animal’s owner. Such
services may include: fetching and transporting the dead animals, preparing the bodies, burying or cremating
them, scattering the ashes, or supplying and installing a gravestone. In certain cases drinks are also offered to
the family and friends present for consumption on the premises. Such transactions must be considered as a
whole as a service subject to the standard VAT rate, if they are carried out for valuable consideration and take
place in Belgium in accordance with article 21, § 2 of the VAT Code (see also the Decision of 9 February1999,
no. E.T. 52.022). Moreover, it has been clarified that coffins or urns intended for animals are also subject to the
standard VAT rate (Decision of 4 July 2006, no. E.T. 111.433, www.fisconet.be).

Programme law – amendment to the VAT Code

(2006/26&27/BE/VAT/1, 51bis, 58, 59, 62bis, 70, 79, 90, 93quaterdecies, 93undecies, WBTW/flat-
rate/scheme/normal/date/MGO) by marc.govers@vat-house.com

The Programme Law of 20 July 2006 was published in the Belgian Official Gazette of 28 July 2006m including an
amendment to the VAT Code, more specifically:
- adjustment of the storage period (art. 58, § 4, 7°, last part, VAT Code – takes effect on 7 August 2006)
- authorisation for bank inspection (art. 62bis VAT Code – takes effect on 7 August 2006)
- representation of the State before the courts (art. 90 VAT Code – takes effect on 7 August 2006)
- adaptation to the Legal Code (art. 93quaterdecies, § 1, third part VAT Code – takes effect on 7 August
2006)
- liability of directors for VAT debts (art. 93undecies C VAT Code – takes effect on 28 July 2006)
- measures to combat abuses and the introduction of several liability for the non-payment of VAT (art. 1,
51bis, 59, 70 and 79 VAT Code – takes effect on 7 August 2006).
Provisions have also been made for implementing VAT debt demands.

Receipt – list of light meals

(2006/26&27/BE/VAT/22 RD1/light/meal/Q1013/Van Campenhout/MGO) by marc.govers@vat-house.com

Article 22, § 1, first part, 2°, of R.D. no. 1 states that the operator of an institution where meals are regularly
consumed is bound to issue customers with a bill or receipt for the provision of meals and drinks consumed with
the meals. For the purposes of this article, all institutions are covered irrespective of their name (restaurant,
pizzeria, cafeteria, chip shop etc.), where hot or cold meals are consumed. In the case of a cafeteria,
administrative circular no. 6 of 27 April 1999 states with respect to the obligation to issue a bill or receipt in point
18 that such operators, as in the case of cafés, inns, tearooms, snack bars, ice cream parlours or patisseries and
similar eateries, are not obliged to issue a bill or receipt however, if the offer is limited to certain light meals
served only with bread, and which are included in an exclusive list. This list of light meals has a limitative
character. However, although the list was inspired by the R.D. of 3 March 1995 to amend the R.D. of 13 June
1984 to determine the conditions for exercising the profession of restaurateur or caterer/confectioner in small and
medium businesses and traditional eateries, there is nothing to prevent it from being revised if necessary and
adapted specifically for the purposes of article 22, § 1, first part, 2°, of R.D. no. 1. If any elements put forward by
professional organisations representing the sectors concerned show that a revision of the list is necessary, the
tax authority is prepared to investigate the issue, for example on the basis of a proposed amended list of “light
meals,” accompanied by the required commentary and clarification. However, it is not the tax authority’s intention
to revise the list spontaneously. The honourable member must understand that, given that the list included in
point 18 of Circular no. 6 of 27 April 1999 is limitative in nature, the inspecting official’s freedom of judgement on
this matter are correspondingly limited. No precise guidelines have been given to the inspecting officials on this
matter, but they are always free, in cases of doubt, as is the case for every taxable person involved, to ask the
central services of the tax authority for an interpretation of the specific case in question (Q&A, Chamber, 2005-
2006, Q. no. 1304 from Mr Van Campenhout on 22 May 2006, no. 127, 24941).

VAT rate on gas, heating oil and electricity

(2006/26&27/BE/VAT/8, 12 6DIR/gas/electricity/oil/rate/Q1314/Goyvaerts/MGO) by marc.govers@vat-
house.com

On the basis of article 12(3)(b) of the Sixth VAT Directive, Member States can apply a reduced VAT rate to the
supply of natural gas and electricity on the condition that they informed the European Commission of this and
came to the conclusion that there was no risk of distorted competition. However, a reduction of the applicable
VAT rate on gas and electricity cannot currently be considered, for budgetary reasons. As for possible distortions
of competition with other Member States because of the different VAT rates in those Member States, it is to be
noted that on the basis of article 8, first part, (e) of the Sixth VAT Directive, the supply of gas through the natural
gas distribution system or of electricity to persons other than taxable resellers takes place where the recipient
effectively uses and consumes the goods. This means that all gas and electricity suppliers are obliged to impose
the VAT rate of the Member State where the goods are consumed, thus eliminating any distortion of competition.
Finally, home heating oil is not included in annex H to the Sixth VAT Directive, meaning that it is not possible to
consider a VAT reduction on it (Q&A, Chamber, 2005-2006, Q. no. 1314 from Mr Goyvaerts on 6 June 2006, no.
127, 24944).

Establishments of rights in rem – VAT deduction and taxable basis

(2006/26&27/BE/VAT/4 RD4/26 WBTW/right in rem/deduction/Q1276/Q1278/Devlies/MGO) by
marc.govers@vat-house.com

A party who establishes a right in rem to a building with VAT applied can deduct from the VAT imposed on this
transaction the VAT imposed on the transactions directly aiming or contributing, as appropriate, to the
construction or acquiring of the building to which this right pertains, as well as the VAT imposed on the
transactions with a direct link to the establishment of this right in rem (see article 4 of R.D. no. 14). Services of
advisors used with a view to establishing rights in rem are considered transactions with a direct link to the
establishment of such rights. The VAT imposed on these services is therefore deductible for the part linked to the
price of the right in rem to the building itself, excluding the land. The costs of these services are not to be
considered part of the construction or purchase price of the building in full ownership for the purposes of
determining the deductible VAT as explained in no. 161 of the VAT Manual (see www.fisconet.be) (Q&A,
Chamber, 2005-2006, Q. no. 1278 from Mr Devlies of 8 May 2006, no. 124, 24394).
When rights in rem are established, the tax authority will only accept the full deduction of VAT if the sale price of
the right in rem approaches the construction or purchase price of the building in full ownership (VAT Commentary
no. 8/160, www.fisconet.be). More specifically, the full deduction of VAT is accepted as long as the sale price of
the right in rem is at least 95 % of the construction price (or purchase price) of the building in full ownership, if
rights in rem are established for a period of less than 10 years, or 97.5 % if they are established for a period of
10 years or more.
The introduction of a minimum taxable basis would mean that VAT would be imposed on a higher amount than
that agreed between the parties, which forms the taxable basis according to article 26 of the VAT Code for the
establishment of rights in rem. This is not the case here.
As for the deduction of VAT, the tax authority respects the jurisprudence of the European Court of Justice, which
states that only the VAT imposed on the elements that amount to the goods being produced and the services
provided for the taxpayer with VAT paid are deductible. In this case, the establishment of rights in rem on
immovable property only implies a partial transfer of the transferor’s rights. This means it is normal for VAT only
to be deductible up to the price relating to the rights in rem established. However, if the price of establishing the
rights in rem is close to the sale price of the immovable property in full ownership, the tax authority will accept full
deduction of the VAT in spite of the rights retained by the transferor. These rules seem fair to the Minister of
Finance (Q&A, Chamber, 2005-2006, Q. no. 1276 from Mr Devlies of 8 May 2006, no. 125, 24557).

VAT obligations of local authorities

(2006/26&27/BE/VAT/4 RD4/local/authority/obligation/Q1295/Devlies/MGO) by marc.govers@vat-house.com

Anyone can invoke the direct effect of Community resolutions if these resolutions have not been correctly
transposed into the corresponding national norm. In judgement no. 57/2005 of 16 March 2005, the Court of
Arbitration answered a pre-judicial question with the declaration that article 6, third part, of the VAT Code violates
articles 170, § 1, 10 and 11 of the Constitution. The consequences of the judgement are in theory relative, in the
sense that the norm continues to exist in law but will no longer be applied by the courts. Nonetheless, the tax
authority is bound to continue applying the legal norm that was the subject of this pre-judicial question. Given
that it explicitly mentions R.D. no. 26, the exploitation of a place where drinks can be obtained with free access to
the public, and taking into account article 4(5), second paragraph, of the Sixth Directive, on the basis of which a
local authority must be considered a taxable person if it carries out such activities or transactions that would
make treatment as a non-taxable person lead to distortions of competition of any significance, a local authority
should always be considered a taxable person. If a local authority has wrongly failed to subject a place where
drinks can be obtained with free access to the public to VAT, then its tax situation needs to be regularised, also
with respect to the past (Q&A, Chamber, 2005-2006, Q. no. 1295 from Mr Devlies of 15 May 2006, no. 125,
24560).

VAT deduction for vehicles

(2006/26&27/BE/VAT/__/deduction/vehicle/Q1265/Wathelet/MGO) by marc.govers@vat-house.com

The words “vehicles intended for sale or rental by a taxable person who carries out a professional activity
consisting of the sale or rental of automobiles” come from the law of 22 June 1972 (Belgian Official Gazette, 7
July 1972), which took effect on 1 March 1972. Incidentally, Notice no. 73 of 11 July 1972 commented on the text
of this clause. This notice is still available on the tax database site www.fisconet.fgov.be. This is a good
description of the lawmakers’ intentions, given that the legal amendments that were later made to article 45, § 2
of the VAT Code, with respect to the term “professional” seller or renter of motor vehicles, had no other aim than
to clarify these words beyond any misunderstanding (Q&A, Chamber, 2005-2006, Q. no. 1265 from Mr Wathelet
of 3 May 2006, no. 126, 24757).

Fight against tax fraud and reverse-charge

(2006/29/BE/VAT/__/fraud/reverse/charge/MGO) by marc.govers@vat-house.com

The enormous growth in VAT circuit fraud that the United Kingdom is experiencing, according to figures quoted
in The Guardian, do not correspond to the discoveries of specialised departments in Belgium, i.e. the special tax
inspectors (BBI), the circuit fraud support cell and the officials attached to the CDGEFID. This does not mean
that the budgetary impact of VAT circuits can be minimised, because in the first half of 2006, discoveries of VAT
circuit fraud were made that amounted to 135 million EUR. The fact that VAT circuit fraud is not growing
exponentially in Belgium like it is in Britain is due to the co-ordinated approach to this problem under this
government and the last one. Since the need for a forceful approach to large-scale tax fraud was highlighted in
the final report, dated 8 December 1998, from the Senate Committee charged with investigating organised crime
in Belgium, a whole battery of measures have been taken with a view to taking a targeted, multi-disciplinary
approach to problems such as VAT circuits.

As for inter-departmental co-operation, this includes the following:

- provision of tax officials at the public prosecutor’s office and the CDGEFID
- co-operation agreements between the departments of Finance and Justice and the federal police in the fight
against mineral oil fraud and VAT circuit fraud
- immediate notice from the CFI to the tax authority of the transfer of a large-scale organised fraud case, such as
a VAT circuit, to the public prosecutor’s office.

Specific initiatives have also been taken at the department of Finance such as:
- the creation of a specific task force
- the use of the Petris procedure for rapid tracing and eliminating of new VAT circuits and other form of fraud in
the mineral oil sector
- the obligation to file a monthly VAT return in high-risk sectors
- increased inspections when starting up an activity in certain high-risk sectors
- multi-disciplinary inspections.

Co-operation between the private and public sector is also used, e.g. as part of the European project to
exchange information on excise goods. In consultation with the Belgian and Dutch professional federations, the
most important operators provide information immediately and spontaneously. These numerous structural
methods of fighting fraud mean that less money is lost from the Treasury as a result of VAT fraud each year, both
in the mineral oil sector and other fraud-sensitive sectors. As part of the last programme law, extra measures
were added to this arsenal, such as accountability for directors with respect to VAT and the advance charge for
companies. A new article 51, § 4 of the VAT Code has introduced several liability for taxable persons who were
aware, or should have been aware, they were involved in VAT circuit fraud.

More generally, the United Kingdom’s request for the reverse charge mechanism to be applied in certain
circumstances must be put in context as part of the intense discussions that have been underway at Community
level since the Austrian presidency, with respect to the application of the reverse-charge mechanism as a tool in
the fight against tax fraud. Following a decision by the informal high-level meeting in Vienna on tax imposition
and the fight against fraud at the beginning of February this year, the European Commission has set up a
technical working group to investigate with the Member States that are interested if the reverse charge
mechanism could be an efficient tool in the fight against tax fraud. This working group, which all the Member
States ultimately ended up taking part in, met on 27 March, 24 April and 17 May 2006. The conclusions of this
working group were verbally clarified by the European Commission at the Ecofin meeting on 7 June 2006,
together with the more general announcement by the European Commission concerning the development of a
strategy to improve the functioning of the VAT system in the context of the Single Market. This announcement
refers to the reverse charge mechanism, but also to a number of alternatives that could be used as part of the
fight against VAT fraud. As stated in the European Commission’s announcement as well, the working group
reached the ad hoc conclusion that the basic condition for any fundamental change to the VAT system with a
view to the fight against tax fraud must observe the following parameters: a considerable reduction in the existing
possibilities for fraud and at the same the prevention of significant new risks of fraud; no disproportionate
administrative burdens for businesses or tax authorities; a continued guarantee of VAT neutrality; a guarantee of
non-discriminatory treatment within a given Member State of the taxable persons who are or are not established
there.

As for the concrete evaluation of the reverse charge mechanism, the conclusion was that the system has both
significant advantages and significant disadvantages inherent to it, and so it would be premature to draw any
definitive conclusions. On the basis of the proposed conclusions by the working group and the announcement by
the European Commission, further study is required, and in particular the value of the reverse charge mechanism
as an anti-fraud device needs further, detailed analysis. The Ecofin Council would then consider at the end of
2006 which elements can be included in a general anti-fraud strategy.

The European discussion of these issues are therefore continuing at the same pace as before. On 20 July 2006,
a meeting of the Fiscal Issues working group in the Ecofin Council was held on the European Commission’s
announcement concerning a strategy to improve the functioning of the VAT system within the Single Market, and
further study and discussions at Community level are bound to follow. These activities will be followed-up closely
in order to be able to reach the appropriate conclusions in due time on a sector-based or more generalised
application of the reverse charge mechanism in the fight against specific forms of VAT fraud, taking into
consideration the idiosyncrasies of the Belgian situation and in the knowledge of all the relevant technical, legal,
economic and budgetary aspects linked to the introduction of a reverse-charge mechanism.

With this aim in mind, there is concrete consideration underway of the possibility of asking for permission on the
basis of article 27 of the Sixth VAT Directive to apply the reverse charge mechanism between taxable persons in
the telecommunications sector, where we have observed that large-scale tax fraud occurs. This proposal is
intended to deal with the frequently occurring ‘cross-border’ fraud and circuit fraud involving resellers. These
structures are used to stock phone shops. They avoid pre-financing VAT on phone card units purchased, which
results in an immediate 21% advantage. Then sales are not declared, resulting in another VAT and income tax
advantage. Honest carriers, providers and phone shops cannot compete. The use of the reverse charge
mechanism would mean that Belgian operators could sell directly to the phone shops again, who would no longer
need to pre-finance the VAT. By eliminating the chain of dishonest resellers in Belgium and abroad, the black-
market circuit in the sector can be dealt with. This will improve Belgian operators’ competitive position with
respect to foreign operators (Verbal question, Senate, plenary session, 13 July 2006, Handelingen, no. 3-177, 8).

VAT treatment of passenger transport

(2006/29/BE/VAT/21, 28, 41 WBTW/passenger/transport/Q.1291/Wathelet/MGO) by marc.govers@vat-
house.com

Passenger transport is a service that is subjected to VAT when it is carried out in Belgium (art. 21, § 3, 3° VAT
Code). Transportation outside Belgium is thus not taxed with Belgian VAT. Article 28(3)(b) of the Sixth VAT
Directive and point 17 of Annex F to this directive allow Member States to continue to exempt passenger
transport from VAT if it was exempt before the directive came into effect (1 January 1978), under the conditions
that applied at that time. By applying these conditions, Belgium has been able to keep the VAT exemption on sea
transport and international air transport of passengers, which have been included in article 41, § 1, 1° of the VAT
Code since 1 January 1971. Since there was no exemption for passenger transport by land (trains, buses etc.) in
Belgium when the directive came into effect, it is not possible to introduce one. Up to now, the European
Commission has not filed any proposal for a uniform taxation – or exemption – for passenger transport. Without
such a proposal, and unanimous acceptance by the Council of the European Union, it is therefore impossible to
change the current rule for the transportation of passengers by coach (Q&A, Chamber, 2005-2006, Q. no. 1291
from Mr Wathelet on 12 May 2006, no. 128, 25131).

Working subsidies
(2006/29/BE/VAT/44 WBTW/subsidy/Q.1320/Goris/MGO) by marc.govers@vat-house.com

A subsidy is a financial intervention granted to a person by the government or government-supported legal entity,
in order to finance activities judged useful for general welfare. Theoretically the allocation of subsidies has no
effect on the beneficiary’s VAT status. Subsidies can be allocated to bodies or organisations whose takings are
insufficient to meet their costs because these bodies or organisations voluntarily apply lower prices to their
services in order to keep them affordable and also to stimulate their users. For example, if subsidies are granted
to the operator of a sports facility, which is a non-profit organisation, to a local authority company or an inter-
communal body, and as a result of these subsidies the takings exceed the costs, this does not mean that the
operator must be considered a profit-making enterprise and excluded from the exemption in article 44, § 2, 3° of
the VAT Code. On the contrary, the allocation of subsidies can be used as evidence that the body or
organisation does not have the means to cover its expenses on its own, or in other words, that its takings are
insufficient in themselves to cover running costs. This means that such bodies or organisations continue to come
under article 44, § 2, 3° of the VAT Code and are still considered taxable persons with no right to deduct (Q&A,
Chamber, 2005-2006, Q. no. 1320 from Mr Goris on 12 June 2006, no. 128, 25140).

Performing artists
(2006/29/BE/VAT/44 WBTW/E.T. 108.828/performing/artist/MGO) by marc.govers@vat-house.com

This concerns the Decision of 30 September 2005, no. E.T. 108.828 and the Information and Communications of
13 April 2006 on the scope of the exemption in article 44, § 2, 8° of the VAT Code for lecturers, performing artists
and participants in sports competitions or sports events. The aforesaid publications are aimed at adapting the
scope of article 44, § 2, 8° of the VAT Code to European and national jurisprudence by extending the exemption
to transactions carried out by legal entities. On the other hand, the possibility of taxing the services of these legal
entities, irrelevant of their legal form, is being investigated. Since this investigation has not yet been completed,
and to prevent the parties involved from having to make a series of regularisations if the VAT law were to be
changed, the Minister of Finance has decided not to insist that the Decision of 30 September 2005, no. E.T.
108.828, be applied for the time being, and to suspend the application of this decision again. In that context, it is
to be remembered that the tax authority will not make any objection if a taxable legal person does want to
exercise the right to a refund of VAT imposed in the past. However, it should be taken into account in that case
that the right to deduct that was originally exercised may be revised in future. Any changes to the VAT system
that apply to the aforesaid persons will be communicated in good time (Informaties en Mededelingen, AOIF-
BTW, 18 July 2006, www.fisconet.be).

Company and service centres

(2006/31/BE/VAT/__/service/centre/Q.1287/Borginon/MGO) by marc.govers@vat-house.com

So that the transactions carried out by a company or service centre can be considered a taxable transaction, the
totality of indivisible services should be offered at a single, flat-rate price. In this respect, Notice no. AOIF
39/2005 of 27 September 2005 sums up the required minimum package of services that this price must include,
as well as all charges, levies and taxes relating to the building and its furnishings. All the criteria included in this
notice were discussed in advance with the representatives of the sector concerned, and approved by them. To
prevent the failure to observe the condition that a specific totality of services must be offered, and with a view to
a uniform and transparent application of the VAT system, no derogations from these criteria are allowed (Q&A,
Chamber, 2005-2006, Q. no. 1287 from Mr Borginon on 10 May 2006, no. 129, 25404).

Dealing with Customs formalities – study of direct representation

(2006/31/BE/CUS/__/formalities/representation/Q.1287/Borginon/MGO) by marc.govers@vat-house.com

The request from the Confederation of Exporters in Belgium (CEB) to use direct representation when filing
Customs and Excise declarations, for which a meeting was held with the CEB on 13 December 2005, is still
being studied by the Customs and Excise Authority. The introduction of the legal device of direct representation
not only requires a feasibility study in legal and administrative terms, but also a study of the practical
consequences of a Customs exporter acting as a direct representative. If a Customs exporter files declarations
as a direct representative, this will doubtless affect the speed and flexibility with which the necessary formalities
can be fulfilled. In contrast to the activity of a Customs exporter (indirect representation), a party acting as a
direct representative must, after all, fulfil a large number of extra requirements. This in turn has far-reaching
implications in various areas. For example, a study must be made of the consequences for providing security,
payment facilities or credit, filing declarations using authorisations or permits granted to the represented party,
proof and inspection of the right to act as a direct representative (mandates), the accountability of the
representative and represented party for paying tax debts, Customs and Export schemes for which direct
representation is possible and so on. The direct representative’s administrative obligations also need to be
considered, and the new legal device needs to be slotted into existing projects such as Paperless Customs and
Excise (PLDA), whereby filing, processing and dealing with Customs declarations will be fully electronic in the
future. In this type of electronic system, after all, the necessary links must be made between the direct
representative and the taxable person(s) represented, for example in terms of providing security and the
represented party’s authorisations and permits).
The CEB has not yet investigated whether there is a genuine need for direct representation in the sector, nor
whether the extra formalities and separate logs that the exporters would have to keep depending on whether
they act as direct or indirect representatives would be proportional to any benefits that direct representation may
entail. As soon as the Customs and Excise Authority has completed its study of the issue, immediate contact will
be made with the Confederation in order to continue discussions (Q&A, Chamber, 2005-2006, Q. no. 1287 from
Mr Borginon on 10 May 2006, no. 129, 25404).

VAT compensation fund

(2006/31/BE/VAT/__/fraud/compensation/Q.1347/Wathelet/MGO) by marc.govers@vat-house.com
Various EU Member States (the United Kingdom, Denmark, Finland, Sweden, the Netherlands and France) have
set up a (full or partial) refund system for the benefit of public bodies for non-recoupable VAT, without direct
refunds occurring according to the VAT system (since this would violate the Sixth VAT Directive). In the northern
countries, the compensation system is fed by contributions from local authorities themselves on a solidarity
basis. The Dutch system, which largely served as an example for the bills of law proposed in Belgium, allows
local authorities to compensate the VAT paid but not deducted by them using a fund financed through VAT
received. Since the European Court of Justice has not yet made any ruling whatsoever on a violation by the
European Commission, it is too soon to say that setting up such funds is incompatible with the European
regulations. However, since this concerns a fund with the specific aim of compensating non-deductible VAT, it is
open to criticism. The fund means that public bodies can effectively benefit from a zero rate on their investments,
whereas article 12(3)(a) of the Sixth VAT Directive prescribes a standard VAT rate to be applied that is no lower
than 15 %. A compensation fund could be considered a means of granting these bodies the advantage of the
right to deduct VAT on the services that come within their capacity as government bodies, although article 17 of
the Sixth VAT Directive only grants taxable persons the right to recuperate VAT on their taxed transactions. With
respect to the exempt transactions carried out by these bodies, the fund could ultimately lead to distortions of
competition in comparison to private-sector operators carrying out the same exempted transactions without the
right to deduct input VAT. In any case, besides the budgetary implications and the difficulty of setting clear
criteria to determine which investments qualify for the fund, the functioning of this system is vulnerable to the
important criticism that it mainly benefits the richest local authorities. After all, the more the local authority
invests, the more it will be able to claim back from the compensation fund.
Incidentally, the revision of article 6 of the VAT Code that is currently being prepared is intended to put public
and private bodies on an equal footing for all their transactions where they compete with each other. Finally, the
debate has been going on for years at Community level as to the application of VAT to government bodies,
whereby increasing subjection of local government services to VAT obligations could lead to clearer insights and
better management of spending (Q&A, Chamber, 2005-2006, Q. no. 1347 from Mr Wathelet on 27 June 2006,
no. 129, 25413).

Benefits of all kinds and standard market value

(2006/31/BE/VAT/__/benefit/value/Q.1348/Wathelet/MGO) by marc.govers@vat-house.com

The Minister of Finance has confirmed that there is currently no legal condition prescribing that the taxable basis
that applies to providing vehicles for private purposes, when there is a special link between the parties (e.g.
employer-employee), is the standard market value described in article 32(2) of the VAT Code. The statement
concerning the taxable basis of transactions between parties with a special link, published in the Belgian Official
Gazette on 29 July 2005, is only intended to inform taxable persons that the amendment whereby the standard
market value is considered the taxable basis in certain special circumstances, will be implemented with
retroactive effect from 1 August 2005 if it is permitted by the Ecofin council. The aim of this publication is to
ensure legal certainty and transparency, in order to prevent the need for the taxable persons concerned to
regularise their accounts later. The authorisation procedure initiated at the European Commission is still pending
(Q&A, Chamber, 2005-2006, Q. no. 1348 from Mr Wathelet on 27 June 2006, no. 129, 25414). [Please note: in
the meantime, the Ecofin Council approved directive 2006/69/EC, containing this authorisation, on 24 July 2006.]

Administrative co-operation between VAT authorities at EU level

(2006/31/BE/VAT/__/administrative/cooperation/Q.1335/van der Maelen/MGO) by marc.govers@vat-house.com

Regulation (EC) no. 1798/2003 of 7 October 2003 concerning administrative co-operation came into effect on 1
January 2004. In contrast to a directive requiring conversion into national law, regulations apply directly.
Regulation (EC) no. 1798/2003 has therefore applied in Belgium since 1 January 2004. The new regulation
(revoking and replacing Regulation (EEC) no. 218/92) is intended to enable a direct, and therefore faster and
more efficient, exchange of information between the Member States. For this reason, article 3 of this regulation
allows a certain decentralisation of the authorised government body. Besides the CLO (“Central Liaison Office”),
which continues to take primary responsibility for the exchange of information, the EU Member States have the
possibility to appoint “connecting departments” (with territorial or functional authority) and/or to indicate officials
authorised for the direct exchange of data. In Belgium, therefore, authority has particularly been allocated to the
central services of the BBI for the direct exchange of information concerning the fight against fraud. Incidentally,
for the purposes of the bilateral agreement signed with Germany in December 2002, the NIOD (National and
International Investigation Department) serves to share information (in German) with the four neighbouring
Länder (Baden-Württemberg, Nordrhein-Westfalen, Rheinland-Pfalz and Saarland) using an antenna in Eupen.
Negotiations are underway with the Netherlands to amend the agreement signed in 2004 in order to take account
of the new regulation. As a result of the administrative agreement signed with France on 10 July 2002, a cross-
border mechanism was signed on 23 June 2006. Its aim is to enable more direct contact between local Belgian
services and the local services of the départements in northern France. As part of multilateral inspections, the
official appointed for this purpose also has the authority to exchange information directly for the entire duration of
the multilateral inspection. Regulation (EC) no. 1925/2004 of 29 October 2004 has set more detailed
implementation provisions for some of the conditions of Regulation (EC) no. 1798/2003. Specifically, it has stated
precisely which categories of information can be exchanged without a prior request, namely information on non-
resident taxable persons, information on new vehicles, information on distance sales, information on intra-
Community transactions and information on possible “missing traders.” Sending this information can be
automatically structured (i.e. as soon as the information is available) or automatic (at agreed intervals). The
information is exchanged by electronic means using a layout developed by a working group to which Belgium
made a significant contribution. This system is currently entering its start-up phase.
Section VI (articles 28 to 34) of Regulation (EC) no. 1798/2003 deals with the conditions for the special scheme
in article 26C of the Sixth VAT Directive (e-commerce). Article 34 of Regulation (EC) no. 1798/2003 specifies,
however, that the conditions of articles 28 to 33 apply during the period stated in article 4 of Directive
2002/38/EC, i.e. until 30 June 2006. Council Directive 2002/58/EC of 27 June 2006 amended article 4 of
Directive 2002/38/EC by extending this period from 30 June 2006 until 31 December 2006 (Q&A, Chamber,
2005-2006, Q. no. 1335 from Mr Van der Maelen on 19 June 2006, no. 130, 25683).

Domain concessions
(2006/31/BE/VAT/__/domain/concession/Q.1259/Wathelet/MGO) by marc.govers@vat-house.com

The answer to parliamentary question no. 1008 of 24 November 2005 from Mr Arens is not based on a legal
condition but on the clarifications provided by the European Court of Justice in case C-284/03 (Temco), in its
judgement on 18 November 2004 with respect to the definition of the concept of immovable leasing for VAT
purposes. Investments in this context are considered to pre-date 1 January 206 if the VAT imposed on these
investments was incurred before that date in accordance with the conditions of articles 17 and 22 of the VAT
Code. Certain public institutions can retain their right to deduct, and the domain concessions they have made are
no longer to be subjected to VAT. As for any possible distortion of competition, this is a temporary, transitional
situation resulting from the amendment to the previous administrative standpoint. Since this led to certain
reasonable expectations in the past on the part of the authorities granting the concessions, the principles of legal
certainty and good management do not allow any other standpoint. The change to the system will put an end to a
certain amount of unequal treatment between public and private bodies. In that sense, the relevant conditions of
the VAT Code were never in question. It is merely that the concept of immovable rental for VAT purposes were
subject to an administrative interpretation that was too limited, although this is an autonomous concept in
Community law, which provides the only guarantee of uniform VAT application throughout the European Union
(Q&A, Chamber, 2005-2006, Q. no. 1259 from Mr Wathelet on 2 May 2006, no. 131, 25900).

Administrative commentary on the Programme Law

(2006/31/BE/VAT/__/AFZ 14/2006/comments/programme/law/MGO) by marc.govers@vat-house.com

The tax authority has issued Notice no. AFZ 14/2006, dated 24 August 2006. It is a general initial commentary on
the Programme Law of 20 July 2006. In part, it adopts texts from the Clarification Memorandum to this
Programme Law, plus a number of extra clarifications.
More specifically, the notice deals with:
- the measures to prevent abuse (references to the European jurisprudence plus the Kittel/Recolta Recycling
judgements)
- several liability in cases of abuse
- the several liability of directors
- the other amendments made.
With respect to the date when the abuse clauses take effect, and their application, the authority has noted that it
is fully justified in acting to prevent abuse, irrelevant of the abuse in question occurs now or in the past. Since the
tax authority did not react in the past to such abuses, despite being aware of them, or even abuses that it
approved of, the legal certainty principle prevents the authority from returning to transactions whose taxable fact
occurred before the law took effect. Therefore in theory, transactions carried out in the past in good faith will be
overlooked, which does not of course mean that similar transactions may simply be continued or implemented in
the future.

The tax authority has also given a reminder of the rule that a new law does not only apply to circumstances that
occur after it takes effect, but also to the future consequences of circumstances that occurred under the previous
law that occur or continue under the new law, as long as their application does not detract from rights that have
already been declared irrevocable (Court of Cassation, 21 February 2003). Given that several liability with
respect to abuse is a new measure intended to ensure that VAT is collected (and not intended to tax a new
category of transactions, activities or facts), there is nothing to prevent it from applying to past transactions. Even
if the taxable fact for certain transactions occurred before this law came into effect, the application of several
liability can be fully justified, e.g. if a wholesaler has sold a customer (the retailer) goods “under the counter,”
which are then sold on without VAT.

Bill of law for the obligatory electronic filing of VAT returns

(2006/40&41/BE/VAT/__/return/electronic/MGO) by marc.govers@vat-house.com

The bill has been passed by the Chamber and is being dealt with in the Senate. The deadline for evocation is 27
November 2006.
It is rumoured that the following time scheme will be proposed (to be set out in a Royal Decree in implementation
of this bill):
From 1 July 2007: businesses with a turnover higher than 50 million EUR (excluding VAT)
From 1 July 2008: everyone who files a monthly return + businesses with a turnover higher than 200 000 EUR
(excluding VAT) for supplies of mineral oil, mobile phones, computers and accessories and land vehicles that
require a number plate
From 1 July 2009: everyone who files a quarterly return

Use of business assets for private purposes – interpretation of AOIF Notice no. 5/2005
(2006/40&41/BE/VAT/11 WBTW/ET111.834/Notice 5/2005/C-269/00/private/use/MGO) by marc.govers@vat-
house.com

Point 3.5 of AOIF Notice no. 5/2005 of 31 January 2005, which clarifies the practical implications of the European
Court of Justice’s judgement on 8 May 2003 in case C-269/00, Wolfgang Seeling, states that the amount of
expenses paid by a taxable person for the use of a business asset for private purposes must correspond to one
fifteenth of the part of the price of that asset that relates to private use. This method of calculating the taxable
basis for the private use of business assets has been criticised by legal experts and even rejected by specific
jurisprudence (Rb. Bergen, 8 August 2006). Nonetheless, the administrative standpoint has now been confirmed
by the European Court of Justice. After all, in its judgement on 14 September 2006 in case C-72/05,
Hausgemeinschaft Jörg und Stefanie Wollny, the Court declared as law that article 11 A (1)(c) of the Sixth VAT
Directive must be understood to mean that there is no objection to the taxable basis for VAT of the private use of
part of a building that is included in full in the taxable person’ s business assets being set at a proportion of the
purchase or establishment costs of this building determined on the basis of the duration of the revision period for
VAT deduction, which is determined according to article 20 of the Sixth VAT Directive (Decision of 19 October
2006, no. E.T. 111.834, www.fisconet.be).

Services linked to damage settlements – Damage Commissioner

(2006/40&41/BE/VAT/__/ET103.851/2/damage/insurance/commission/C-427/03/MGO) by marc.govers@vat-
house.com

The Decision of 25 April 2005, no. E.T. 103.851, which refers to the European Court of Justice’s decision of 3
March 2005 in case C-472/03 (Arthur Andersen & C° Accountants c.s.), excludes the possibility of exempting
services carried out by damage commissioners as part of the mandate given to them by insurance companies
with a view to dealing with cases of damages. In the meantime, a working group with members fro the European
Commission and the Member States has been charged with a new investigation of the VAT treatment applicable
to financial and insurance transactions with a view to amending the appropriate clauses of the Sixth VAT
Directive. In anticipation of concrete proposals from this working group, the European Commission has
requested the EU Member States not to change their national regulations concerning these transactions. Taking
the above into account, the aforesaid decision was also revoked, with the result that the contents of nos. 9-15 of
Notice no. 10 of 19 March 1979 continues to apply for the time being. The transactions carried out by damage
commissioners on behalf of insurance companies, and more generally by persons given a mandate by these
companies to deal with damage settlements (irrelevant of whether they relate to land, sea or air insurance) can
therefore continue to benefit from the exemption that applies to intermediaries in insurance transactions. IN this
respect, it is to be noted that only those service provisions that occur within the framework of dealing with
damage cases can benefit from the exemption. The back-office services that are not part of such a mandate (e.g.
services related to collecting unpaid insurance premiums, audits, providing information, advice and support,
providing statistical data etc.) which are carried out on behalf of an insurance company have always been
taxable and will remain so. Finally, attention is drawn to the fact that persons with a mandate to deal with
damage cases may, if they wish, invoke the conditions of the aforesaid judgement by the European Court of
Justice and subject the transactions they carry out in the context of managing damage cases to VAT. In this case
the option is irrevocable (Decision of 14 November 2006, nr. E.T. 103.851/2, www.fisconet.be).

New models for automatic VAT Returns

(2006/40&41/BE/VAT/__/return/model/MGO) by marc.govers@vat-house.com

The tax authority has publicised new models (2007 versions) for automatic VAT returns, namely:
- the periodic VAT returns
- the intra-Community report
- the annual VAT sales listing.
An update is also available for the clarification of how to file the intra-Community report and the annual VAT
sales listing on a magnetic carrier (www.minfin.fgov.be).

Bill for a law containing various clauses

(2006/42&43/BE/VAT/1, 42, 44, 55, 93quaterdecies WBTW/various/MGO) by marc.govers@vat-house.com

On 21 November 2006, the government introduced a bill for a law containing various clauses. It includes a
number of technical adjustments to the VAT Code:
- replacement of the words “in Belgium” by the words “in the same Member State” (art. 1, § 6, 1° of the
VAT Code)
- statement of the correct nomenclature for warships (art. 42, § 1, first part, 4° of the VAT Code)
- management of institutions for collective investment and pension-financing bodies (art. 44, § 3, 11° of
the VAT Code)
- completion by a reference to the supply of gas and electricity (art. 55, § 1, first part, of the VAT Code)
- amended terminology for governments (art. 93quaterdecies, § 1, second part of the VAT Code).

VAT deduction on hired cars

(2006/42&43/BE/VAT/__/deduction/hire/car/MGO) by marc.govers@vat-house.com

The hire of a vehicle is actually a hire contract for moveable goods, an agreement whereby one party is bound to
allow the other party enjoyment of the goods for a certain period in return for payment of an agreed price.
Consequently, a taxable person who systematically provides all his customers with vehicles for a certain period
in return for a price that corresponds to the market has the right to deduct VAT in full from the acquisition of the
vehicles used for this purpose and the costs linked to them. As long as these conditions are met, there is no
question of discrimination between persons who hire out vehicles on the one hand and garage owners who make
a vehicle available to consumers in return for payment on the other. In the context of the legal stipulations,
incidentally, it could be considered omitting the words “for everybody” from the law text in order to prevent any
difficulties (Chamber, Committee for Finance and the Budget, verbal question, 22 November 2006, COM 1106,
8).

Invoicing the sale of drinks to private persons

(2006/42&43/BE/VAT/__/sale/drink/person/MGO) by marc.govers@vat-house.com

When asked if there are quantitative limits, in terms of the obligation to provide an invoice for VAT purposes, to
distinguish drinks purchased for private purposes from those purchased for professional purposes, the Minister
of Finance replied that article 9 of Directive 92/12/EEC of 25 February 1992 sets indicative levels to decide
whether products bought by private individuals in other Member States need to be considered as purchased for
non-commercial purposes. This clause has been converted into article 9 of the Law of 10 June 1997. Given that
the clause must be applied strictly, and has led to judgements by the European Court of Justice, it must also
serve as a basis for the obligation to provide a VAT invoice for excise goods. It is not opportune to oblige a
private person who buys excise goods in Belgium to ask for an invoice if a till receipt is sufficient for the same
purchase in another Member State (Chamber, Committee for Finance and the Budget, verbal question, 22
November 2006, COM 1106, 9).

State of affairs re introduction of Paperless Customs and Excise

(2006/42&43/BE/CUS/__/paperless/MGO) by marc.govers@vat-house.com

Implementing the Paperless Customs and Excise project has been spread over three packages: “returns and
collection,” “supplement to returns and collection,” and “support for investigations and file management.” The first
package has been undergoing testing since April 2006. If this application turns out to be sufficiently stable, the
project will be initiated two months later and Sadbel will be terminated. It is expected that the project will be able
to start some time in February 2007. Testing the second package will begin in April 2007 and it will begin
production by July 2007. Scheduling for the third package cannot be confirmed until later this month. It is
expected that the package will be supplied in the last quarter of 2007 (Committee for Finance and the Budget,
verbal question, 22 November 2006, COM 1106, 14).

Reduced VAT rate for building council houses

(2006/42&43/BE/VAT/__/rate/building/MGO) by marc.govers@vat-house.com

The government declaration of 17 October 2006 proposed a reduction of the VAT rate on council houses. The
first measure decided upon by the government is to reduce the VAT rate from 12% to 6% for the construction of
council houses by the regional housing societies and recognised building societies, which directly sets the scope
of the measure. The second measure deals with the disadvantaged areas of big cities. The 6% reduced rate will
be applied, not only to immovable work on buildings more than 5 years old – a measure that has been extended
until the end of 2010 – but also to the demolition of houses, for example after they have been declared unfit for
habitation, with the intention of replacing them with decent housing. This measure is limited to the major cities
listed in the Royal Decrees of 12 August 2000, 26 September 2001 and 28 April 2005, containing the
implementation of article 3 of the law of 17 July 2000 to determine the conditions under which local governments
can receive financial support from the State (Committee for Finance and the Budget, verbal question, 29
November 2006, COM 1112, 1).

Diplomatic delegations, consular postings, international organizations or military forces – ongoing supplies of
water, gas and electricity, and the services of telecommunications and cable distribution companies
(2006/42&43/BE/VAT/1, 16, 22 WBTW/1
RD1/E.T.111.330/embassy/international/organisation/supply/ongoing/MGO) by marc.govers@vat-house.com

Given the conditions of article 1, § 1, 11°, and article 5, § 1, 10°, of R.D. no. 1, taxable persons who supply
goods or provide services with an exemption are obliged to issue an invoice to the recipient, stating the legal
basis by which the supply or service has been exempted from VAT. Circulars no. 1 and 2 of 3 January 1978
stated that the exemption depends upon the diplomatic delegation, consular posting, international organisation or
military force issuing the supplier or service provider with a request for a VAT exemption. That document, bearing
the stamp of the beneficiary organisation, must clearly state the name and address of the supplier or service
provider, as well as the nature and quantity of the goods to be supplied or the services to be rendered. This
document must be retained by the supplier or service provider to support his book of outgoing invoices as
justification for non-payment of the tax. This document formalises the request for a VAT exemption for supplies
and services that are taxable in Belgium. For this reason, the organisation in question is required to issue such a
document for each supply or service to which a VAT exemption can be invoked.

In accordance with 16, § 1, part 1, 1°, or article 22, § 1, part 2, of the VAT Code, in cases of ongoing supplies of
goods or services that lead to a succession of bills or payments, the supply is considered to take place or the
service is considered to have been completed at the end of each period to which a bill or payment pertains. This
means that in order to obtain a VAT exemption, an application for the exemption must be provided to the supplier
or service provider for every bill or payment. From 1 January 2007 onwards, a simplification of the above rules
will be allowed for ongoing supplies of water, gas and electricity, and also for telecommunications and cable
distribution services. From that date onwards, the organisation in question will be able to request an exemption
once a year using the “Certificate for exemption from VAT and excise duties (article 15(10), Sixth VAT Directive
and article 23(1), Directive 92/12/EEC)”. The certificate must be validated by the tax authority before being
handed over to the supplier or service provider.

A procedure has also been initiated for the exemption from the energy contribution. The R.D. of 29 February
2004 containing various excise clauses (Belgian Official Gazette, 5 March 2004) assimilates the energy
contribution to a charge equivalent to excise duties, which is imposed on fossil fuels and electricity. The
conditions of the exemption from this tax are identical to those for obtaining a VAT exemption. For this reason,
the exemption from the two charges will occur by means of a single validated certificate (Decision of 1 October
2006, no. E.T.111.330, www.fisconet.be).

Date when amendment to article 85bis of the VAT Code comes into effect
(2006/45&46/BE/VAT/85bis WBTW/return/MGO) by marc.govers@vat-house.com

A Ministerial Decree dated 23 November 2006 appeared in the Belgian Official Gazette on 30 November 2006 on
behalf of the Minister of Justice, confirming the return form for a dependent child. The amendment to article 85bis
of the Belgian VAT Code (by means of the law of 20 July 2006 containing various clauses), has been set to come
into effect two months after the date when this return form is publicised in the Belgian Official Gazette. Its layout
is to be determined by the Minister of Justice. Consequently, the date when article 85bis of the Belgian VAT
Code comes into effect will be 30 January 2007.

Draft Programme Law

(2006/45&46/BE/VAT/__/programme/law/MGO) by marc.govers@vat-house.com

On 27 November 2006, the government filed a bill for a Programme Law. It includes the following items relating
to VAT:
- measures concerning the fight against fraud and improved tax collection:
- confiscation of suspicious goods (new art. 52bis of the VAT Code)
- positions of privilege (art. 87 of the VAT Code)
- requirement for security for possible future insolvency (new art. 88bis of the VAT Code)
- possibility of closing the business (new art. 88ter of the VAT Code)
- custodial confiscation for contested debts (new art. 89bis of the VAT Code)
- notification obligation for solicitors and bailiffs with respect to public sales (new art. 93undecies D of
the VAT Code)
- legal interest:
- change to the reference to the interest rate in civil cases (amendment to art. 91 § 4 of the VAT Code)
- other amendments to the VAT Code (and R.D. no. 20):
- governmental VAT obligations (art. 6 of the VAT Code)
- limit to transactions equivalent to services on moveable property (art. 19, § 1 of the VAT Code / art.
/45&46/, § 3, 2° of the VAT Code)
- determination of place of estate agents’ services (art. 21, § 3, 8° of the VAT Code)
- definition of market value (art. 32 of the VAT Code)
 - application of the market value as the taxable basis in certain situations (art. 33 of the VAT Code)
- VAT deduction of company assets (art. 48, § 2 of the VAT Code)
- expert estimate (art. 59, § 2 of the VAT Code)
- increase in fines (art. 73, 73bis en 73quater of the VAT Code)
- addition to anti-abuse clause (art. 79, § 2 of the VAT Code)
- standard VAT rate as a principle (art. 1 R.D. no. 20)
- deadline for applying the reduced VAT rate to labour-intensive services (art. 1bis and 1ter R.D. no. 20)
- reduced VAT rate for work on immovable property with respect to council housing and new buildings in
deprived areas of big cities (addition to R.D. no. 20).

Draft of a law containing various technical amendments

(2006/45&46/BE/VAT/__/programme/law/MGO) by marc.govers@vat-house.com

On 5 December 2006, the government filed a bill for a law containing various clauses (III). It includes a number of
technical amendments to the VAT Code that have been passed on from the law containing various clauses (I) to
(III):
- statement of the correct nomenclature for warships (art. 42, § 1, first part, 4° of the VAT Code)
- completion by referring to supplies of gas and electricity (art. 55, § 1, first part of the VAT Code)
- amended terminology for governments (art. 93quaterdecies, § 1, second part, of the VAT Code).

Use of the Single Document as of 1 January 2007

(2006/45&46/BE/CUS/__/SAD/MGO) by marc.govers@vat-house.com

The following announcement has been made with respect to persons who declare Customs and Excise goods in
Belgium (and it will also appear in the Belgian Official Gazette).
The Customs and Excise Authority has announced that in Belgium:
- with respect to the Customs and Excise declaration on the (paper) Single Document form, the return to be
made on 1 January 2007 will require use of the new clarification of the Single Document
- with respect to the electronic declaration as well, the new clarification on the Single Document will be used as of
the date when the paperless declaration system (PLDA) comes into effect in Belgium.
The PLDA declaration system will come into effect two calendar months before the date when the effective
beginning of use of this system is announced in the same way. The current SADBEL system, using the old
clarification of the Single Document, will continue to be used until it is replaced by the PLDA declaration system.
The requirements linked to the new clarification of the Single Document can be consulted in circular no. DD
274.057 of 1 December 2006 concerning the application of the new clarification of the Single Document (D.I.
530.11). Any later changes to the clarification will be published simultaneously with the required changes to the
PLDA system.

Circular D.D. 274.057 of 1 December 2006 concerning the application of the new clarification of the Single
Document will be published online very soon.

Reverse charge on importation – adaptation to the EU extension on 1 January 2007

(2006/45&46/BE/VAT/__/import/reverse/charge/MGO) by marc.govers@vat-house.com

The tax authority has published Notice no. AOIF 41/2006 of 20 November 2006. This is an addendum to Notice
AOIF no. 1/2006 of 2 January 2006 concerning reverse charging on importation (permit E.T. 14.000). Since
Bulgaria and Romania will be joining the European Union on 1 January 2007, these countries must be taken into
account where relevant for revision of input VAT.

Provision of sewers by a city or local council

(2006/45&46/BE/VAT/4 6DIR/E.T.500.264/charge/MGO) by marc.govers@vat-house.com

In his answer to the parliamentary question of 27 October 2005 from Mr Steverlynck, the Minister of Finance
stated that a local council can be considered a taxable person for “transport services” in accordance with article
4(5) of the Sixth VAT Directive, on the condition that the local council provides a service that effectively
represents a transport service. The mere passive provision of a sewer system, however, cannot qualify as a
transport service. If this provision, as part of a fairly passive activity, grants the tenant an exclusive right to use
the sewer, whereby the price is set with respect to the duration of usage and possibly the immovable
infrastructure provided, then this provision is in principle considered to be a rental of immovable property that is
exempt from VAT on the basis of article /45&46/, § 3, 2°, of the VAT Code, which does not give rise to any right
to deduct VAT. In this respect, one may refer to the jurisprudence of the European Court of Justice, in particular
to the judgements made in cases C-284/03 of 18 November 2004 (Temco Europe SA) and C-150/99 of 18
January 2001 (Stockholm Lindöpark AB). If the conditions set by the European Court of Justice with respect to
the classification as immovable rental are not met, then this provision is a taxable service. In this context, it can
be stated that for VAT purposes, (Notice no. 83 of 15 December 1970) transport must be understood to mean:
“the transfer of goods (i.e. waste water) or persons from a specific place (i.e. connection to the sewerage system)
to another specific place (i.e. collector/ small-scale water purification plant), whatever the means of transport
used to do so.” In this context, the notice from the tax authority explicitly classifies “f) services related to the
transfer of gas, liquids or other products through pipelines;” as a transport service.
The service provision described in the draft contract between the city of X and the drinking water company
concerned contains far more than a mere passive provision of municipal infrastructure. The collection and
disposal of wastewater is a service requiring various activities. There is active intervention in the collection and
disposal of wastewater. Besides keeping the infrastructure operational, supplementary services are carried out,
such as supervision of the operation of the pump stations and overflows, small-scale water purification plants etc.
Consequently these transactions are classified as a service provision on which VAT is incurred, more specifically
as a transport service, for which the city of X can be considered a taxable person for VAT (prior decision of 8
August 2006, no. E.T.500.264, www.fisconet.be).