What foreign contractors need to know about the Belgian “VAT reverse charge”

The place of supply of services connected with immovable property, is the place where the immovable property is located. If the immovable property is located in Belgium, Belgian VAT applies. In practice, however, we find that many foreign contractors and subcontractors are unsure whether they can, may or must reverse charge Belgian VAT. There are persistent misconceptions about the Belgian reverse charge rules. This is because Belgian law does not fully equate foreign and Belgian contractors. If you are a foreign contractor or subcontractor, please read on! 

WHEN CAN YOU REVERSE CHARGE BELGIAN VAT? 

As a foreign (sub)contractor, you can only reverse charge Belgian VAT (location of the immovable property) if the following conditions are met:  

• The service provider (the contractor or subcontractor) is not established in Belgium. It is irrelevant whether or not he is registered for VAT in Belgium. 

• The works take place on Belgian territory. The services are – in short – not VAT exempt and do not fall under any other location rule. 

• The customer of the services (the co-contractor) is either (a) a customer established in Belgium who submits periodic VAT returns, or (b) a customer not established in Belgium who has appointed a VAT representative in Belgium. The customer must have both a Belgian VAT number and a VAT representative established in Belgium. 

It is essential for foreign (sub)contractors to check whether the above conditions are met. 

If you are a service provider not established in Belgium and you invoice your Belgian construction works to a customer not established in Belgium, you must check whether the latter has a Belgian VAT number and a Belgian VAT representative. He must have both for you to be able to reverse charge the Belgian VAT. If this is not the case, you will have to register for VAT in Belgium and charge Belgian VAT (usually 21%) to your client not established in Belgium. 

EXAMPLES 

• You are a Polish subcontractor, perform construction work in Belgium, and you invoice to a German customer who is not registered for VAT in Belgium. You cannot apply the reverse charge rule and will therefore have to register for VAT in Belgium and charge Belgian VAT to your German customer. 

• You are a Dutch self-employed person, perform construction work in Belgium, and you invoice a Dutch customer who, although having a Belgian VAT number, has not appointed a VAT representative in Belgium. You cannot apply the reverse charge rule and will therefore have to register for VAT in Belgium and charge Belgian VAT to your Dutch customer. 

• You are a Dutch self-employed person, perform construction work in Belgium, and you invoice a Dutch customer who has a Belgian VAT number and has appointed a VAT representative in Belgium. You can invoice without VAT. You state “VAT reverse charge, art. 51, §2, 5° Belgian VAT Code” on your outgoing invoice and you therefore do not have to register for VAT in Belgium. 

DOES IT MAKE SENSE TO REGISTER FOR VAT IN BELGIUM? 

If you are a foreign contractor carrying out (construction) work in Belgium and working with non-Belgian subcontractors, we advise you to register for VAT in Belgium on a voluntary basis with the appointment of a VAT representative. If you meet the above conditions, you can use the reverse charge rule for your outgoing invoices to your (usually Belgian) customer. This means you are not actually required to register for VAT in Belgium, but it is still advantageous for you. 

If you register for VAT in Belgium with the appointment of a VAT representative, you achieve two things:  

• You avoid the pre-financing of Belgian VAT since your (non-)Belgian subcontractors do not have to charge you Belgian VAT. In that case, they can apply the reverse charge rule (see above). 

• You avoid the need for your non-Belgian subcontractors to register for VAT in Belgium. One own VAT registration may replace several other VAT registrations. 

WHAT ARE THE RISKS? 

Anyone who reverse charges Belgian VAT in the above-mentioned situations when this is not possible, runs the risk that the Belgian tax authorities will reclaim the VAT from them. In addition, they will then impose a fine of 20% and also claim late payment interests (currently 8%). 

SUMMARY 

• Invoice from a non-Belgian (sub)contractor to a Belgian taxable person who submits periodic VAT returns: reverse charge VAT ✅ 

• Invoice from a non-Belgian (sub)contractor to a non-Belgian taxable person with VAT representative in Belgium: reverse charge VAT ✅ 

• Invoice from a non-Belgian (sub)contractor to a non-Belgian taxable person without VAT representative in Belgium: ❌ charge Belgian VAT 

Do you still have questions about the Belgian reverse charge rule or would you like to appoint our firm as your VAT representative in Belgium? If so, please contact our VAT specialists.