Belgium will abolish the VAT exemption for cost-sharing associations (independent groups of persons) in the financial sector (banking – insurance). A draft law has been approved.
This position follows the judgments of the CJEU cases DNB Banka (C-326/15) and Aviva (C-605/15) of 21 September 2017. The benefit of the exemption will be abolished as of 1 January 2022. There will be no retro-active effect, but members entering a cost-sharing association after 30 June 2021 and associations created after 30 June 2021 will no longer benefit from the VAT exemption.
The cost-sharing VAT exemption remains applicable for VAT exempt entities in the social sector (hospitals, social, cultural, etc.). For these cost-sharing associations, we recommend checking that all conditions for applying the VAT exemption are still met (for example, if a member of the association has significant financial or immovable rent revenues).
Comments and practical implications
This alignment with the position of the CJEU was expected. Luxembourg for example immediately adapted its position and introduced a VAT grouping regime in 2019.
In Belgium, many cost-sharing associations in the financial sector have already been replaced by VAT groups.
For the existing Belgian cost-sharing associations (or for Belgian members of a cross-border association) in the financial sector, the alignment with the position of the CJEU will create additional VAT costs.
Alternatives can be envisaged to limit this cost such as applying another VAT exemption, adapting the input VAT deduction method, VAT grouping, etc. This will require an in-depth analysis.
Therefore, it is important to measure the impact to your business now. We would be pleased to assist you in reviewing the impact of the draft law on your business and to consider alternative option(s) most adequate to your unique circumstances.
Your Contact Persons
- Lionel Wielemans, VAT FS Director – +32 477 69 84 79
- Inge Stuyver, VAT FS Senior Manager – +32 473 91 02 44
- Jean-Baptiste Sanchez, VAT FS Senior Associate – +32 470 47 22 50