VAT and immovable rent: administrative guidelines published

Since the publication and entry into force of the Law of 14 October 2018 amending the Belgian VAT Code and implementing the new optional VAT regime for immovable rent, administrative guidelines accompanying this new legislation were expected to be published.

In addition to the administrative notice of 9 January 2019 on the reimbursement of historical VAT as a result of the optional taxation of immovable rental, the VAT administration published a new Circular letter on 21 March 2019 (Circular letter 2019/C/25).

Administrative notice: Reimbursement of historical VAT  as a result of the optional taxation of immovable rental.

The new VAT option for immovable rental allows for (historical) input VAT to be deducted. As a result, for VAT that became chargeable before 1 January 2019, which in the past was often not or not fully deductable, a refund can be claimed going forward.

To mitigate the budgetary impact of the refund of historical VAT, the VAT authorities foresee a staggered refund. More specifically, the notice stipulates that the amount of the historically refundable VAT must be set off against the amount of VAT due as it arises periodically in the VAT returns (box 71) as from the first quarter of 2019.

If after this settlement an amount of historical VAT is still eligible for refund, this VAT credit is transferred to the following VAT reporting periods until no further VAT credit remains.

Please note however that the amount of the VAT credit, that cannot be settled in the first eleven monthly VAT returns or the first three quarterly VAT returns of the year 2019, can be deducted (in full) in the monthly VAT return of December 2019 or the VAT return for the fourth quarter of the year 2019, regardless of the end result of these declarations.

Finally, and not without importance, the administration states that the VAT taxable person who wishes to reclaim historical VAT must provide the competent VAT office with an inventory of the goods and services on which he wants to reclaim historical VAT.

Circular Letter 2019/C/25: FAQ regarding the application of the new legislation in the field of immovable rent

In addition to the aforementioned administrative notice, the VAT administration has published a Frequently Asked Questions (FAQ) on 21 March 2019.

The FAQ provides an insight into the practical application of the VAT option for immovable rent. Practical guidance is given on: which type of immovable property is eligible for the new option, whether parts of immovable property can be subject to the VAT option for immovable rent, whether vacancy has an impact on the initial VAT deducted, etc. The published administrative guidelines are to a large extent in line with what became previously known through the parliamentary documents and author texts.

In addition, the FAQ provides guidance on the application of the mandatory application of VAT for short-term (max. six-month duration) immovable rent (which could previously also be considered VAT exempt). Practical guidance is given on: which type of short-term immovable rent is meant, how the six-month period should be calculated (e.g. in the case of successive contracts), etc.

Finally, the FAQ provides an explanation of the new administrative guidelines regarding the rental of storage facilities. The published administrative guidelines are on these topics also in line with what became previously known through the parliamentary documents and author texts.