VAT registration in Belgium – The good choice
VAT is normally due by the supplier of goods or the service provider [general rule]. Therefore, when a foreign company is performing taxable operations in Belgium for which it is liable for VAT, it must charge Belgian VAT to its client. In order to do so, it must register for VAT purposes either directly or through a fiscal representative.
Combined with the general reverse charge mechanism applicable in Belgium, the option for a foreign company to appoint a fiscal representative can be useful in order to avoid pre-financing of VAT. Indeed, that mechanism renders the client liable for the VAT due when the latter is a Belgian company submitting periodical returns or a foreign company identified for VAT purposes in Belgium with a fiscal representative.
Example 1: Purchase/ Re-sale of Goods
A British company purchases goods in Belgium and then resales them to a German firm which takes care of transporting them outside Belgium. The British company performs a taxable operation [an intra-community delivery] for which it is obliged to register for VAT purpose in Belgium. Appointing or not a fiscal representative on its own authority will depend on the place where its provider is established:
- If its provider is established in Belgium, the latter must issue an invoice charging Belgian VAT Þ there is no point for the British company to register for VAT through a fiscal representative. It can register directly for VAT purposes;
- However, if its provider is not established in Belgium [for example if it is a Dutch provider], the latter will also have to issue an invoice charging Belgian VAT unless the British company has a Belgian VAT identification number and a fiscal representative.In this case, the person liable for the payment of Belgian VAT to the Treasury is the British company itself [generalised reverse charge mechanism] Þ therefore it is useful for the British company to name a fiscal representative in such a situation in order to avoid any VAT pre-financing.
Example 2: Carrying out a construction work
An Austrian company is operating a construction site in Belgium [construction work] on behalf of a German company which has a Belgian VAT identification number but no fiscal representative [direct registration for VAT purposes]. It calls on Belgian subcontractors to undertake part of construction works.
The Austrian company is performing a taxable operation [construction works] for which it is obliged to obtain a VAT identification number and must invoice Belgian VAT to its German client since the latter did not name a fiscal representative in Belgium, although it has a Belgian VAT number.
Subcontractors will also have to charge Belgian VAT unless the Austrian company registers for VAT purposes through a fiscal representative [specific reverse charge mechanism for construction works] Þ therefore it is useful in such a situation to designate a fiscal representative in order to avoid any VAT pre-financing on the invoice of the Belgian subcontractor.
For historical reasons, a large number of foreign companies are still carrying out their activities in Belgium through a duly authorised fiscal representative. Nevertheless, it is an administratively more cumbersome system [bank guarantees, VAT documents, etc.] than direct VAT registration and is fiscally interesting only in very specific situations. In most cases, naming a fiscal representative is unnecessary.
In a difficult economic context, switching from one system to another can allow a foreign company either to optimize VAT pre-financing, or make substantial savings in the management-related costs of its Belgian VAT number.