Date: 12 October 2017
Issuing Authority: FPS Finance, General Administration of Taxation – Value Added Tax
1. Introduction
Circular 2017/C/64 provides administrative guidelines regarding the implications of recent case law from the Court of Justice of the European Union (CJEU) on the exercise of the right to deduct input VAT in Belgium. It specifically addresses the importance of possessing a regular invoice as a precondition for VAT deduction.
2. Legal Provisions
- The right to deduct VAT is governed by Article 45 of the Belgian VAT Code, which stipulates that the goods and services must be used for transactions eligible for VAT deduction.
- Taxpayers must possess a valid invoice as per Article 3, § 1, 1° of Royal Decree No 3, which aligns with Article 178(a) of the EU VAT Directive. This establishes that a proper invoice is necessary to exercise the right to deduct VAT.
3. Recent European Case Law: Substance Over Form
- The CJEU’s recent judgments, such as Senatex (C-518/14) and Barlis (C-516/14), emphasize the principle of VAT neutrality. They state that input VAT should be deductible if the substantive conditions are met, even if formal requirements are not fully complied with.
- The principle of “substance over form” is reinforced, meaning that the tax authorities cannot impose additional conditions that inhibit the exercise of the right to deduct if the substantive requirements are satisfied.
- The CJEU recognizes that valid proof of transactions can sometimes be established through means other than invoices, and that additional documents provided by the taxpayer should also be considered.
4. Consequences for Belgian Practice
- Previously, if an invoice was deemed irregular or incomplete, tax authorities would typically refuse the VAT deduction. However, the CJEU’s case law suggests that this may not always be the case.
- The tax authorities in Belgium are instructed to assess VAT deductions based on corrected invoices and additional documents that clearly relate to the original invoice, provided that:
- The substantive conditions for deduction are met.
- The taxpayer has not engaged in fraudulent activities or was aware of any fraudulent context related to the transaction.
- Acceptable additional documents may include contracts, order forms, quotes, and correspondence, which should be submitted before the conclusion of any tax inspection.
Conclusion
Circular 2017/C/64 highlights a shift in Belgian VAT administrative practice by adopting a more flexible approach in line with recent CJEU rulings. It stresses that while a regular invoice is essential, the existence of substantive evidence can validate VAT deductions even in cases of formal deficiencies. Tax authorities are encouraged to consider the overall context and documentation surrounding a transaction when assessing the right to deduct VAT.
Source Fisconet
