Ultimately on 1 July 2023 all mixed VAT payers must notify the Belgian VAT authorities electronically of their option to (continue to) apply the direct attribution method for the determination of the right to deduct input VAT.
VAT deduction mixed taxable persons
Mixed taxable persons apply a general pro rata in order to determine their right to deduct input VAT, unless:
- they have opted for the application of the direct attribution method, or,
- the Belgian tax authorities impose the direct attribution method (in order to safeguard the principle of VAT neutrality).
To date this notification was informal and even accepted during the course of an audit.
Requirements for the application of the direct attribution method in 2023
As from 2023, the application (or the end) of the use of the direct attribution method must be communicated via the electronic forms ‘e604A’ or ‘e604B’ before 31 January (monthly VAT returns) or 31 March (quarterly VAT returns) in order to apply this method as of 1 January of that year.
Mixed taxable persons who already apply this method on 31 December 2022 have until 1 July 2023 to perform this electronic notification. Failure to perform this notification in due time results in the application of the general pro rata method until 1 January of the next year.
The direct attribution method must be applied for at least (minimum) three consecutive years.
The following additional information must be provided in the first VAT return of each calendar year:
- the final ratio applicable to the taxpayer in respect of the previous calendar year;
- the pro rata, expressed as a percentage, in accordance with the criteria applied by the taxpayer at the time of notification, of the tax charged to the taxpayer between transactions that:
- are used exclusively for the business division or divisions whose transactions give rise to a right of deduction (full right of deduction);
- are used exclusively for the business division or divisions whose transactions do not give rise to a right of deduction (no right of deduction at all);
- are used simultaneously for the business division or divisions whose transactions give rise to a right of deduction and for the business division or divisions whose transactions do not give rise to a right of deduction.
- a pro rata applicable to the goods and services used simultaneously for the business divisions whose transactions give rise to a right of deduction and the business divisions whose transactions do not give rise to a right of deduction (“special pro rata”). Where the taxable person uses several such ratios, each of them should be shown separately, as well as the overall result of applying those special ratios to the tax charged to the taxable person on the transactions used simultaneously for the business divisions that give full or no right of deduction.
The VAT Authorities can refuse the right to deduct the input VAT according to the direct attribution method up to two years after the notification if this method does not / no longer correspond with the reality.
If you have any questions or want some help regarding the above, please do not hesitate to contact us at: [email protected]
RSM Belgium | Tax