The Belgian VAT authorities recently published a new administrative decision on the impact of the CJEU court case Skandia America Corp (C-7/13, 17 September 2014) with regard to Belgian VAT legislation.
Following the position of the CJEU, all head office/branch transactions are subject to VAT if the branch or the head office is part of a VAT group. Head office/branch transactions are only out of scope of VAT (FCE case) if neither of them belongs to a VAT group.
This has the following consequences:
- the normal Belgian VAT rules (e.g. place of supply, VAT liability, obligations, application of exemptions, etc.) are applicable for head office/branch transactions where the branch or head office is part of a VAT group, regardless of any costs being re-charged within the VAT group.
- the right to deduct VAT for the VAT group will be limited to the extent that the VAT group is regarded as a mixed taxable person. In this case, when calculating its general pro rata, the Belgian VAT group must not take into account the sales of its foreign establishments (of its members).
- the existing provision that services received by a Belgian establishment from its head office/branch are subject to VAT if the Belgian establishment is a member of a Belgian VAT group (article 19bis of the Belgian VAT Code) is no longer required and will be removed from the Belgian VAT Code as the CJEU confirmed that such transactions are subject to VAT. This provision was only applied in the case of channelling.
The above consequences should be applied as of 1 July 2015.
If your company is part of a Belgian VAT group or has one or more entities that are members of a foreign VAT group, you should assess the impact of this new position of the Belgian VAT authorities, e.g. for any additional VAT due in Belgium. Furthermore, as Member States do not have the same approach regarding the Skandia case, such assessment should take into account the VAT treatment in the country of the service provider/recipient. Indeed, the Belgian position could in some cases lead to double taxation/non-taxation.
For more information, please contact your local PwC adviser.