The Act of 30 July 2013 (NL/FR) confirmed the removal of the Belgian VAT exemption for services of lawyers with effect from 1 January 2014.
As a result, VAT has to be applied to all fees and costs charged for lawyer services rendered as of 1 January 2014.
To do so, in principle, all Belgian-based law firms and all individual lawyers will need to register for VAT before year-end and set-up an appropriate VAT accounting from 2014 and onwards.
The Belgian VAT authorities have now published a first guideline commenting on the impact this new VAT regulation brings (Practice Note no. 47/2013 (E.T.124.411) dated 20 November 2013 – NL/FR).
What does this VAT change mean for Belgian law firms and lawyers?
- Insofar as your Belgian office is already registered for VAT in Belgium, its current output VAT position (A/R) will not change. On the other hand, your Belgian office will be faced with a VAT working capital impact as a result of the additional 21% VAT borne on the fees and costs paid to the individual lawyers (A/P).
- If your Belgian office is not registered for VAT in Belgium, VAT registration is required by 2014.
Starting 1 January 2014, your Belgian office will have to start issuing VAT-compliant invoices to its external clients, with or without Belgian VAT depending on the case. Moreover, your Belgian office will need to file periodic VAT returns and recapitulative listings. The good news is that your Belgian office will benefit from a full VAT deduction right, including a possible ‘historic’ right to adjust the Belgian VAT borne on investments and goods and services purchased before 2014 (subject to the general Belgian VAT deduction limitations, invoicing requirements and specific rules that may apply regarding historic VAT adjustments).
- All self-employed lawyers (partners, associates and trainees) working for your Belgian office (including those working via personal services companies) in principle will also be required to register for VAT in Belgium by 2014, unless where they can benefit from a relief as small VAT entrepreneur (current turnover threshold of < EUR 5.580), as statutory director or active partners. Starting 1 January 2014, your Belgian office will need to pay an additional 21% Belgian VAT on the monthly fees paid and costs reimbursed to its Belgian-based lawyers and be in possession of valid VAT invoices from their lawyers so as to be able to recover this additional input VAT.
- We also advise you to review the impact of this Belgian VAT change on the requirement for your Belgian office to issue fee forms 281.50.
Main topics VAT Practice Note from 20 November
- Optional simplified arrangement for lawyer-associates and lawyer-trainees (working as individuals or via a company) in exchange for a voluntary waiver of their input VAT credit right (including historic input VAT credit rights);
- Moment when VAT becomes due and transitional arrangements for services spanning 1 January 2014;
- VAT tax base including advance payments and cost recharges;
- Right of input VAT recovery, including specific rules regarding historic VAT adjustments.
How PwC Belgium can help you
- Organising informative workshops on the impact of the removal of the Belgian VAT exemption for lawyers, both for your Belgian office and for its individual lawyers;
- Advising on the different compliance options available and on the best fit for both your Belgian office and its individual lawyers;
- Assisting with the Belgian VAT registration process for your Belgian office and/or your self-employed Belgian-based lawyers;
- Advising and assisting with possible options to reduce or even waive the VAT working capital effect of the new regulation for your Belgian office (licence for monthly refund, set-up of a self-billing procedure, with or without reverse charge, set-up of a VAT grouping, etc.);
- Setting-up and/or assisting with your (VAT) accounting, including the review of the VAT codes set-up;
- Assisting with the preparation and/or electronic filing of the VAT return and listings (where appropriate);
- Conducting a one-off or periodic VAT sanity check for your Belgian office;
- Providing you with tailored advice on law firm specific topics, including VAT, accounting, HR, corporate legal and income tax.
If you have any further questions or wish to discuss the possible impact on and needs for your Belgian office, please do not hesitate to contact Sophie Claessens (+32 3 259 3169), Mark Bijnens (+32 2 710 7413) or your regular PwC adviser.