Parliamentary question clarifies whether (for direct tax purposes) “small tools, small equipment and stationary” should be considered as an investment or an immediate expense.

Written by Philippe Vanclooster 16 April 2014


Recently, the minister of Finance answered a Parliamentary question regarding “small equipment, small tools and stationary”, i.e. whether for direct tax purposes, “small equipment, small tools and stationary” should not be considered as an investment and can therefore be directly expensed?

According to the Minister of Finance, and based on accounting law, the company should define the valuation rules in order to consider whether or not these should be treated as an investment and expensed over the economic lifetime of the goods or to be fully expensed in the financial year of purchase. Therefore, both options are possible.

Link with Belgian VAT principles

According to the Belgian VAT legislation, goods, rights in rem or services are considered as capital goods when the company intends to sustainably use these as a business asset.

However “small equipment, small tools and stationary” are not considered as capital goods if the purchase price or the normal value (in absence of a purchase price) per unit is lower than EUR 1,000 (excluding VAT).

Note: the threshold of EUR 1,000 has recently been changed (previously EUR 250), and is applicable as from January 1, 2014.

We would like to point out that the threshold of EUR 1,000 relates to the obligation to revise the input VAT if these types of goods are being used for another purpose within a period of five years. This should not be confused with:

  • a self-supply (‘onttrekking’) whereby the VAT regularization is always applicable regardless from any threshold; and
  • a guideline to define whether or not goods should be treated as an investment. It is up to the management of a company (represented by its directors (NV) or managers (BVBA) to define the valuation rules.

Conclusion

The increase of the threshold to EUR 1,000 is merely in the context of the Belgian VAT law, and other aspects need to be taken into consideration:

  • the ‘investments’ need to be registered in the investment table (based on the valuation rules for accounting purposes);
  • identify and keep track of “small equipment, small tools and stationary” with a value above EUR 1.000 per unit that have been directly expensed in a separate overview to in view of a potential VAT revision;
  • both type of transactions should be reported in the VAT return in box 83;
  • consider the possibility to have an excess depreciation for direct tax purposes on “small equipment, small tools and stationary” that would have been fully expensed instead of spreading the cost over the economic lifetime;
  • private use of “small equipment, small tools and stationary” (e.g. mobile phones, …) could be considered as a benefit in kind for the user (if this is not mentioned on the staff salary slips, the company may be subject to a (tax-deductible) 309% secret commission’s tax on the unreported amount. It is therefore advisable to draw up a company policy in this respect).

In order to mitigate possible issues from an accounting, direct tax and indirect tax perspective, we would advise to keep track on this type of assets via relevant control procedures.

Do not hesitate to contact Jorgen Broothaers +32 2 710 71 83 or Tonny Taeymans +32 2 710 71 12 to evaluate and (where possible) improve current control processes within your company.