As was the case last year, many VAT changes came into force on 1 January this year. One change in particular concerns the formalities for applying the VAT deduction scheme according to the general pro rata method.
Since 1 January 2023, these formalities had already applied to the deduction method according to actual use. Mixed taxable persons applying the general pro rata deduction method are now also affected. This gives the VAT administration better insight into mixed taxable persons and their right to deduction, regardless of the method used.
As noted above, these measures concern mixed taxable persons (i.e. taxable persons carrying out both VAT-subject and VAT-exempt activities, both of which fall within the scope of VAT in accordance with Article 2 of the Belgian VAT Code).
What about partial taxable persons? A partial taxable person is a taxable person who carries out both operations that fall within the scope of VAT (whether subject to or exempt from VAT) in accordance with Article 2 of the Belgian VAT Code and operations that fall outside the scope of VAT – such as a holding company which both receives dividends and grants loans to its subsidiaries.
In principle, partial taxable persons are not subject to the deduction rules specifically provided for mixed taxable persons. However, in reality they use the same deduction method as mixed taxable persons who opt for the ‘actual use’ basis. As a result, the rules set out below regarding the scheme in which the deduction method is based on actual use (and in particular the recurring formalities) are in principle also applicable to them. Regarding the prior notification obligation, this is not clearly stated in the legislation.
In this article, we review the changes to both deduction methods and highlight the key points to bear in mind in practice.
On 1 January 2023, the legislators introduced a prior notification obligation for new and existing taxable persons who were already applying or wished to apply the deduction method based on actual use (via MyMinfin).
For taxable persons who were already applying this method before the new measure came into force, this notification had to be made using form E604 before 1 July 2023.
From now on, any taxable person wishing to apply the deduction method based on actual use is required to notify the VAT administration within the following deadlines:
Once the notification has been made, the scheme must be applied at least until the end of the third year following the effective date of notification (if the person concerned remains a mixed taxable person).
In terms of recurring formalities, the mixed taxable person must also provide the following additional information via Intervat:
If the taxable person submits monthly reports, this information must be communicated with one of the first three monthly reports. If the taxable person submits quarterly reports, this information must be communicated with the first quarterly report.
If these formalities are not complied with, the deduction method according to actual use will definitively cease to apply.
The taxable person who no longer wishes to apply the actual use deduction scheme (with a view to switching to the general pro rata deduction scheme) must indicate this by means of a prior electronic notification before the end of the year. The change will take effect from 1 January of the year following notification
Note that this notification is not necessary if the change results from a change in the taxable person’s activity (which leads to him/her becoming a fully exempt taxable person or a taxable person who is 100% subject to VAT) or from the cessation of his/her activities. However, these changes must be communicated via form E604.
Once the notification has been made, the VAT administration will send an acknowledgement of receipt in PDF format. This acknowledgement of receipt merely serves as proof that the notification has been made.
In principle, the VAT administration has until 31 December of the year following the year in which the option to apply the deduction method based on actual use takes effect to give notice of its refusal.
The refusal decision must be accompanied with reasons. The VAT administration also has the option of proposing modifications to the method (for example relating to the special pro rata figures to be applied). The taxable person may submit an adapted request (via a complaint or a request for an agreement).
It is also important to note that in the absence of a refusal decision, the VAT administration always reserves the right not to authorise the application of the deduction method based on actual use if a subsequent check shows that the VAT deduction does not correspond to reality or is far too high. The VAT administration may therefore either impose new special pro rata figures or compel the taxable person to apply the general pro rata.
As is the case with the scheme in which the deduction method is based on actual use, from 1 January 2024 mixed taxable persons wishing to apply the VAT deduction scheme according to the general pro rata method must notify the VAT administration using form E604.
The following deadlines apply in this context:
Once notification has been made, the scheme is applied by the taxable person for an indefinite period.
Every year, the taxable person must communicate his/her pro rata figure based on the previous year’s turnover (or on forecasts if the taxable person is starting his/her activities). This pro rata figure constitutes
This pro rata must be communicated at the latest in the VAT declaration for March (for taxable persons reporting monthly) or for the first quarter (for taxable persons reporting quarterly).
A spreadsheet supporting these general pro rata figures must in principle also be submitted.
The taxable person who no longer wishes to apply the general pro rata deduction scheme (with a view to switching to the actual use deduction scheme) must indicate this by means of a prior electronic notification before the end of the year. The change will take effect from 1 January of the year following notification.
Note that this notification is not necessary if the change results from a change in the taxable person’s activity (which leads to him/her becoming a fully exempt taxable person or a taxable person who is 100% subject to VAT) or from the cessation of his/her activities. However, these changes must be communicated via form E604.
| Actual use | General pro rata | |
| Entry into force | 1 January 2023 | 1 January 2024 |
| Notification method | Form E604 (commencement or change of activities) | Form E604 (commencement or change of activities) |
| Notification deadline for taxable person |
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| Application period | At least until 31 December of the third year following the effective date of prior notification | Indefinite period |
| Change of deduction method | Notification before the end of the year. The change will take effect from 1 January of the year following notification (taking into account the minimum application period above) | Notification before the end of the year. The change will take effect from 1 January of the year following notification |
| Information to be communicated every year by 20 April at the latest (via Intervat through the VAT declaration) |
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