Stricter rules coming up for payments in B2B relationships
The rules to combat late payment in commercial transactions will become stricter and this with effect from 1 February 2022. This follows from the Act of 14 August 2021 amending the Act of 2 August 2002 on combating late payment in commercial transactions (Late Payment Act).
The current Late Payment Act
The current Late Payment Act already contains various measures to combat late payment in contractual relations between enterprises and between enterprises and public authorities. It contains the following rules aimed at improving payment behaviour:
(i) Payment term
If no date or time limit for payment has been fixed, any payment made as compensation for a commercial transaction between enterprises must be made within a period of thirty calendar days. The parties may agree on a different payment term. However, if the creditor is an SME and the debtor is not an SME, it shall not be possible to defer payment for more than 60 days. This measure was intended to protect SMEs against economically stronger debtors.
(ii) Start of payment term
The law stipulates that the term of payment starts to run from the day following that
- of receipt by the debtor of the invoice, or
- of receipt of the goods or services if the date of receipt of the invoice is uncertain or if the debtor receives the invoice earlier than the goods or services; or
- of acceptance or verification, with a view to verifying the conformity of the goods or services with the contract, if a procedure of acceptance or verification is provided for by law or in the contract and if the debtor receives the invoice earlier or on the date on which such acceptance or verification takes place.
If a procedure of acceptance or verification is applied, its maximum duration should in principle not exceed 30 calendar days from the date of receipt of the goods or services. However, if the creditor is not an SME, it is possible to contractually deviate from this rule.
(iii) Default interest
If the creditor has fulfilled his obligations and has not received the amount due on time, he shall be entitled to interest from the following day, ipso jure and without notice of default, unless the debtor proves that he is not responsible for the delay. Unless the parties have agreed on another interest rate, the legal interest rate applies. This currently amounts to 8%.
(iv) Liquidated damages
If default interest is due, the creditor is entitled ipso jure and without notice of default to payment of a liquidated damages of 40 euros for its own recovery costs. In addition, he is entitled to reasonable compensation for all other recovery costs that exceed this fixed amount and that have arisen due to late payment.
Under current law, the payment term can be extended by the length of the control and verification period. Large enterprises will use this period to extend the maximum payment term to 90 calendar days instead of the standard 60 days. The possibility of contractually determining the start date of the payment term is also often abused. And although the law gives creditors a right to interest on late payments, large creditors often put pressure on them not to claim these amounts. The same applies to liquidated damages for late payment. In this way, large enterprises provide themselves with credit at the expense of their suppliers. It has also been established that a longer payment term of 90 calendar days increases the risk of bankruptcy for SMEs.
Stricter rules from 1 February 2022
(i) Maximum payment term of 60 calendar days
It will be prohibited for all enterprises, regardless of size, to agree on a payment term of more than 60 calendar days. A deviating stipulation in an agreement or in the general conditions will be null and void and the payment term shall be automatically reduced to the statutory term of 30 calendar days. However, exceptions are possible for certain sectors. The payment term, which may exceed 60 calendar days, will be laid down by Royal Decree after advice from the High Council for the Self-Employed and SMEs. As of today, no Royal Decree has been issued yet.
(ii) Verification period is part of payment term
If a period was agreed upon for the verification of the conformity of the goods delivered or services performed, this shall be an integral part of the payment term. This means that the maximum payment term of 60 calendar days can no longer be extended by the verification period.
(iii) Prohibition of contractual stipulation of the date of receipt of the invoice
At the latest upon receipt of the goods or performance of services, the debtor shall provide the creditor with all the information necessary to issue the invoice. In other words, it is no longer possible to make contractual arrangements that set the receipt date of the invoice at a later date.
(iv) Automatic increase of the amounts due with default interest and liquidated damages
If the creditor has not received the amount due on time, the outstanding amount shall be increased by interest from the following day ipso jure and without notice of default, unless the debtor proves that he is not responsible for the delay. In such a case, the outstanding amount shall also be increased, ipso jure and without notice of default, by liquidated damages of 40 euros the creditor’s collection costs. All other recovery costs that exceed this fixed amount are also recoverable. The aim of this automatic increase is to avoid putting creditors under pressure not to claim default interest and liquidated damages.
PERSONAL INCOME TAX
Belgian special tax status – expected changes
In the framework of the Belgian budget agreement, the Belgian Federal Government announced its intention to adjust the well-known special tax regime for foreign executives by reducing some of the benefits and most likely introducing some limitations to the well-known and favourable special tax regime that was initially introduced by the circular letter of August 8, 1983.
The aim of this special tax regime for foreign executives, the so-called “special tax status”, was to attract foreign employees, who are highly skilled and qualified, to Belgium in return for a reduction of Belgian income tax and social security contributions due to the high labour cost in Belgium.
Prior to obtaining this special tax status, an administrative procedure needed to be fulfilled whereby both the employer and employee needed to demonstrate amongst others the temporary nature of the assignment or employment in Belgium or that the employee was hired abroad.
Earlier this year, the Belgian tax authorities already announced some changes regarding the procedure to apply for the Belgian special tax status (as of March 1, 2021).
Recently, the Belgian government also announced a shift in the special tax status as a whole. However, the impact of the changes nor the exact starting date of the changes – that are currently being discussed – have not yet been announced.
Currently, on the discussion table are some propositions to adjust the special tax regime, but these could still be adjusted along the discussion process the next months.
- A possible limitation on the duration of the special tax regime.
- The matter of the so-called statelessness, for expats who were deemed to be non-resident taxpayers in Belgium, and often no longer resident in another country. The Belgian government is looking into the possibility of qualifying expats as Belgian tax residents implying that the foreign executives will need to report their worldwide personal income (such as foreign movable or rental income) in their Belgian tax return, leading to an increased Belgian tax burden compared to today.
- Under the current special tax status, the expat’s remuneration is divided between a part corresponding to work performed in Belgium (which is taxable in Belgium) and a part corresponding to remuneration for professional activities performed abroad (which is excluded from taxation in Belgium). This so-called foreign travel exclusion and the non-taxable allowances may be replaced by a lump-sum deduction, somewhat comparable to what is used in the Netherlands (the so-called “Dutch 30% rule”).
- A certain “minimum salary level” may be introduced, which will have an impact on the eligibility of the special tax regime for a number of expats. This minimum wage level could be substantially higher than what is required for immigration/employment purposes, i.e. 43.524,00 EUR (Flanders region) / 43.395,00 EUR (Brussels/Walloon region) which is currently being applied.
However, what will exactly be changed, or which new conditions will be included in the new law, and as of when these will become applicable, are still unclear at this stage. It is also unclear whether a transition period will be introduced for existing expats.
Since we do not yet have view on any draft legislation the above changes are not final. Once we have obtained more information in this respect, we will keep you posted.
1. COVID-19 – Reduced VAT rate for mouth masks and hand sanitizer gels extended
One of the COVID-19 measures by the Belgian Authorities was a temporary VAT rate decrease to 6% for mouth masks and hand sanitizer gels.
In a new Circular Letter 2021/C/88 the Belgian VAT Authorities have extended this VAT rate decrease. The reduced rate is applicable for:
- Mouth masks – GN codes 4818 90 10, 4818 90 90, 6307 90 93, 6307 90 95, 9020 00 10 90, 9020 00 90 99
- Hand sanitizer gels – GN codes 2207 20 00, 3808 94 10, 3808 94 20, 3808 94 90
In principle, the reduced rate is only applicable in case the aforementioned goods are supplied, IC acquired or imported in relation to COVID-19.
The reduced rate is a temporary measure lasting until 31 December 2021.
2. AS A REMINDER - Permanent cancellation of the December pre-payment
As December is approaching we remind you of the fact that December pre-payment has been cancelled permanently.
Last year, the December VAT pre-payment was cancelled as one of the COVID-19 measures.
The pre-payment was a procedure whereby the taxable person needed to pay an advanced VAT payment for the December transactions by 24 December. In principle the VAT related to these transactions were due by 20 January. There were two calculation methods:
- A payment based upon the actual transactions performed between 1 and 20 December
- A payment of the same amount paid for November / 3rd quarter
In the former case the taxable person needed to report the amount in box 91 of the Belgian VAT return. Box 91 of the Belgian VAT return stays on the form but is not be used anymore.
3. IC transfer of building materials by contractor applying the OSS-regime
When a contractor, not established in Belgium, transfers building materials from his warehouse outside Belgium to a construction site in Belgium, this transfer is to be considered as a IC supply in the EU Member State of dispatch and as a IC acquisition in Belgium.
As a consequence, the contractor needs to register for Belgian VAT purposes in Belgium.
In a new Circular Letter 2021/C/92, the Belgian Authorities make it possible, as from 1 July 2021, to avoid this VAT registration if the contractor is transferring these building materials for a non-taxable person and if this same contractor pays the Belgian VAT via the OSS-regime.
In order to avoid the Belgian VAT registration the following conditions need to be met:
- The construction site and address is known at the moment of the dispatch
- All transferred goods have to be incorporated in the building
- The contractor would have a right to deduct 100% of the VAT if he would be VAT registered in Belgium
- In case of a return of goods the conditions of art. 39bis, 4° of the BE VAT Code are fulfilled (except the IC Sales list)
- The Authorities in the EU Member State of dispatch agree with the point of view of the Authorities (the contractor needs to check this by himself)
This tolerance is not applicable if the contractor has already a Belgian VAT number or if he wants to create a stock in Belgium.
This tolerance is not an obligation – the contractor has the option.
4. VAT exemption of transport services directly related to export of goods
The Authorities have published a Circular Letter 2021/C/96 based upon the Court Decision of the ECJ in the ‘L.C.’ IK case.
The ECJ has ruled that a direct link between the transport services and the export of goods doesn’t only mean that the transport services have made the export happen BUT that these transport services were also directly executed on behalf of the exporter or recipient of the goods.
The Circular Letter points out which consequences this ruling has for the Belgian VAT code. It states that the exemption of transport services can only be applicable if the transport services are performed on behalf of the:
- The supplier or customer of the exported goods;
- The owner, lessee or lessor of the exported goods;
- The factoring company exporting the goods for reparation, factoring or customization;
- The person re-exporting the goods which he had on trial;
- The person re-exporting the goods which he has repaired, factored or customized.
In case the transporter or freight forwarder subcontracts the transport, this transport service cannot be exempted.
This Circular Letter will be applicable as from 1 January 2022.
5. Gradual transition to E-invoicing (and Real Time Reporting?) for B2B transactions
On October 12, 2021, the Belgian government agreed on the Belgian budget.
One of measures is the reference to the gradual transition to E-Invoicing for B2B transactions. Objective is to close the VAT Gap (3.5 Billion EUR). Although no details are known yet, it looks like Belgium will implement E-invoicing gradually based on the size of the companies and take benefit of experiences in the neighbouring countries (France?).
We will keep you posted on any developments.
6. Mandatory reporting of two new variables in Intrastat reporting for dispatches of goods per Jan 1, 2022
As from January 1, 2022 the following changes come into effect and the following information will need to be added to the Intrastat return:
- VAT ID number of the partner in the Member State of acquisition of goods within EU (recipient of goods)
- Country of origin of the goods
On top of that the transaction codes are being changed from 1 to 2 digits. This change will come into effect from the January 2022 Intrastat declarations (expected by 20 February 2022).
Currently the information of the NBB is being updated. We will inform you as soon the updated information is available.
7. Update Belgian VAT Code
Currently, the State Council is reviewing a bill of VAT. The following subjects are touched upon and adjustments are proposed on the following subjects:
- VAT exemptions for political, religious, syndicate, philanthropical... clubs and funds
- VAT on furnished accommodations
- VAT deduction and refund based upon actual use
- When to communicate the VAT registration number
- VAT refunds for non-established taxable persons
- VAT rate deduction for hair protheses.
We will update you once these proposals come into effect.
KEEP IN MIND THE DEADLINE!
- VAT return October 2021 : November 20, 2021
Personal income tax
- Personal income tax return - non-residents
o On paper : November 4, 2021
o Via Tax-on-web : December 2, 2021