VAT deduction based on direct attribution of costs: new rules as from 2023


In Belgium, the pro rata based on turnover is the general VAT deduction method for mixed VAT payers. Beside the prorata, the direct attribution method can also be applied.

This method is widely used in the financial, real estate, not–for-profit and public sector. In practice, most corporate groups also use this method for their activities not generating a right to deduct VAT (financial, holding, etc.). This is also the standard input VAT deduction method for VAT groups with limited right to deduct VAT.

Today the use of the direct attribution method requires an agreement from the Tax Authorities.

Change as from January 2023

The request to apply the direct attribution method has to be filed electronically, and can be applied without awaiting the VAT authorities approval. This simple notification is indeed a simplification but there are several new constraints, among others: 

  • Additional information will have to be communicated.
  • Tax Authorities can reject the application of the direct attribution method up to a period of two years with retroactive effect. 
What if you already apply the direct attribution method ?

You should follow the same process (notification and communication of data) at the latest on 30 June 2023

Key takeaway

Electronic notification may be a simplification, but overall the new rules create new obligations for business and strengthen the powers of the Tax Authorities.

The notification and the communication of data to the Tax Authorities will need to be prepared with due care in order not to risk the retroactive rejection of the VAT deduction method.This is particularly true for companies already applying the direct attribution method.

Please do not hesitate to contact us on this subject, which will also be discussed at Planning the Year End. You can also find the related article as seen in De Tijd.